David Paganie • Houston
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OCS lease sale sets record; revenue sharing begins
Federal OCS lease sales 206 and 224 combined drew over $3.7 billion in high bids. Central Sale 206 individually tallied $3,667,668,246 in high bids, setting a record for high bids since area-wide leasing began in 1983. Eastern Sale 224 attracted $64,713,213 in high bids, setting revenue sharing in motion.
Lease Sale 224 received 58 bids from six companies on 36 tracts. The sale included 118 whole or partial unleased blocks covering 546,971 acres in the Eastern Planning Area. The acreage is 125 mi (201 km) or more offshore, south of the Florida panhandle and west of the Military Mission Line in water depths ranging from 2,657 ft (810 m) to 10,213 ft (3,113 m).
Eastern Sale 224 is the first sale where the revenue sharing provisions of the Gulf of Mexico Energy Security Act of 2006 start immediately. The states of Alabama, Mississippi, Louisiana, and Texas will share in 37.5% of the high bids on whole and partial blocks in the Eastern Planning area. These four Gulf producing states also will share in 37.5% of all future revenues generated from the acreage leased in the area.
The revenue sharing program was mandated by the Gulf of Mexico Energy Security Act of 2006. No royalty relief will be issued with these leases. In Central Lease Sale 206, the royalty rate for blocks in all water depths is increased to 18.75% from 16.7%.
In addition, 12.5% of revenues from sales 206 and 224 will be allocated to the Land and Water Conservation Fund for use by states to enhance parklands and for other conservation projects.
Lease Sale 224 is the only sale scheduled to be held in the Eastern GoM under the current Five Year Outer Continental Shelf Oil and Gas Leasing Program. The acreage included in this sale was last available for lease in 1988.
Lease Sale 206 offered 5,569 tracts comprising about 29.8 million acres in federal areas offshore Louisiana, Mississippi, and Alabama. The acreage is 3 to 230 mi (5 to 370 km) offshore in water depths of about 10 ft (3 m) to more than 11,200 ft (3,400 m). The sale received 1,057 bids from 85 companies on 615 tracts.
Approximately 34% of the tracts receiving bids in the sale are in ultra deepwater (more than 5,249 ft [1,600 m] deep). The deepest water tract to receive a bid was Lloyd Ridge block 286 in 3,076 m (10,092 ft) of water. The highest bid issued on a block was $105,600,789 submitted by a consortium of Anadarko E&P Co. LP, Murphy E&P Co. USA, and Samson Offshore Co. for Green Canyon block 432.
The next lease sale, Western GoM Lease Sale 2007, is scheduled for New Orleans on Aug. 20. The sale includes about 3,400 unleased blocks covering approximately 18 million acres in the Western GoM Planning Area offshore Texas. The blocks are 9 mi to 250 mi (14 km to 402 km) offshore in water depths of 16 ft to 10,978 ft (5 m to 3,346 m). MMS estimates the sale could result in the production of 242 to 423 MMbbl of oil and 1.64 to 2.64 tcf of natural gas.
Lease Sale 205 tallies $2.8 billion
The MMS has accepted bids valued at $2,829,926,881 and awarded 683 leases in Central Lease Sale 205.
Eighty-four companies submitted 1,428 bids on 723 tracts in the sale, held in October 2007. The total for high bids submitted on all tracts was $2,904,321,011.
The highest bid accepted on a tract was $90,488,445 made by Shell Offshore Inc. for Walker Ridge block 7 in 5,240 ft to 6,562 ft (1,600 m to 2,000 m) of water. This tract received 13 bids.
LLOG scores deepwater hat trick
LLOG Exploration Co. LLC has made three deepwater discoveries in its 2007/2008 drilling program. The discoveries are in Mississippi Canyon blocks 72 and 503, and Green Canyon block 448. The MC 503 well reached total depth in late 2007 and the GC 448 and MC 72 wells reached total depth in January 2008.
The MC 72 well penetrated over 100 ft (30 m) of gross gas filled sand. Plans are to tieback the well subsea to the Pompano platform in Viosca Knoll block 989. First production is expected by end-2008. LLOG holds a 60% working interest in the well.
The GC 448 well penetrated over 85 ft (26 m) of oil-bearing sand. Plans are to side track the well this year to an updip location. Pending appraisal results, the well is expected to be completed subsea with first production anticipated in late 2009 or early 2010. LLOG has a 75% working interest in the well.
The MC 503 well penetrated over 380 ft (116 m) of gas and oil pay zones in four separate reservoirs. Appraisal of the discovery is planned for this year with first production anticipated between late 2009 to early 2010. LLOG owns a 100% working interest in the well.
Meanwhile, the company plans to bring onstream its Valley Forge discovery in Mississippi Canyon block 707. The original discovery well was drilled in May 2004. First production is expected in 2Q 2008. LLOG holds a 100% working interest in the well.
The company also has secured Diamond’sOcean America and Noble’s Lorris Bouzigard for deepwater drilling this year.
LLOG plans to ramp up its shelf activity as well, focused in Main Pass, South Timbalier, and High Island.
Hess narrows Pony reserves estimate
Hess has narrowed its estimated range of recoverable resource in its 100%-owned Pony field to 100 to 500 MMbbl of oil from the previously estimated range of 100 to 600 MMbbl of oil. This is based on results of appraisal well Pony No. 2.
The well was drilled 1.5 mi (2.4 km) northwest of the discovery well to 32,900 ft (10,028 m) MD. It encountered the objective target sands in a downdip position in the water leg, according to Hess. Following wireline evaluation and pressure data collection, the company plans to side track the well to the oil leg updip. Meanwhile, development evaluation continues.
Healey development planning under way
Development planning of the 100% W&T-owned Healey discovery is under way. The field is in Green Canyon block 82 in 2,400 ft (732 m) of water.
Development options include a floating production system, and a subsea tieback to the Lobster platform,Morpeth TLP, or Prince TLP. According to W&T, 3P reserves are estimated at 270 bcfe.
MMS recognizes safety
The MMS has announced the winners of its 2007 District Safety Award for Excellence (SAFE) honors in the Gulf of Mexico and Pacific regions.
Winners are selected by MMS district offices on the basis of safety performance and compliance during the rating period.
The 2007 SAFE award winners for each MMS GoM District are:
New Orleans
- High Activity - Anadarko Petroleum Corp.
- Moderate Activity - Anglo-Suisse Offshore Partners
- Production Contractor - Baker Energy
Houma
- High Activity - Chevron USA Inc.
- Drilling Contractor - Pride Offshore
- Production Contractor - Danos & Curole Marine Contractors Inc.
Lafayette
- High Activity - Anadarko Petroleum Corp.
- Moderate Activity - Energy Resource Technology Inc.
- Drilling Contractor - Rowan Drilling Company Inc.
- Production Contractor - Evans Operating
Lake Charles
- High Activity - Chevron USA Inc.
- Moderate Activity - Nippon Oil Exploration USA
- Drilling Contractor - Transocean Inc.
- Production Contractor - Wood Group Production Services
Lake Jackson
- High Activity - Anadarko Petroleum Corp.
- Moderate Activity - GOM Shelf LLC
- Drilling Contractor - Noble Drilling, US
- The Pacific Region Safe Award for Moderate Activity was given to Pacific Energy Resources.
Deepwater interest drives record sale
Central Lease Sale 206’s record results were driven by continued interest in the deepwater play. About 60%, or 365, of the blocks bids on lie in 800 m (2,625 ft) water depth or greater and about 88%, or $3.68 billion, of the total winning bids were offered for blocks in the this water depth range.
The following series of graphs generated by Raymond James illustrate the industry’s continued interest in deepwater.
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