Economic policy changes could increase deepwater GoM production
Offshore staff
WASHINGTON, D.C. – Certain economic policy changes may help increase oil and natural gas production in the Gulf of Mexico, using existing deepwater infrastructure, according to new research from the Bureau of Ocean Energy Management (BOEM) and Bureau of Safety and Environmental Enforcement (BSEE).
Principal Deputy Assistant Secretary of the Interior Casey Hammond said: “This research provides critical information that demonstrates energy production in the Gulf of Mexico should not be managed with a ‘one size fits all’ approach.
“Promoting robust oil and natural gas production is our obligation to the American public and with the findings from this research, we are better equipped to prevent the stranding of our nation’s valuable energy resources in deepwater.”
The study evaluated and recommended updating economic parameters used by BOEM’s sister agency, BSEE, in the evaluation of certain special case royalty relief applications. This research examined future wells using subsea tiebacks, including extended-reach tiebacks, that require high-cost enhanced flow assurance technologies (EFAT), such as subsea booster pumps.
According to the report, “BOEM recommends that BSEE allow companies to self-report discount rates, but that BSEE impose an upper bound on reported discount rates of 20% for deepwater subsea tiebacks requiring EFAT. This 20% upper bound would allow companies to earn appropriate rates of return, help ensure deepwater resources are not stranded, and protect the government’s right to receive appropriate royalty payments.”
BSEE Director Scott Angelle said: “Promoting the recovery of the remaining oil and natural gas resources in deepwater is responsible management of our nation’s resources. Protecting the interests of the American public is our responsibility as BOEM estimates 4.5 Bboe are in proximity to these deepwater facilities.”
Deepwater production, in water depths more than 656 ft (200 m), accounts for 92% of total GoM offshore oil production and 14% of all domestic oil produced in the US. In 2019, facilities in deepwater GoM averaged a record-breaking 1.7 MMb/d of oil.
About four out of five deepwater facilities are producing less than 50% of their daily oil production capacity (based on a three-year average of daily production rates), according to the bureaus.
As noted in the new research, significant volumes of contingent resources exist roughly 30-60 mi (48-97 km) from existing facilities. Producing these resources would likely require subsea tiebacks with additional high-cost subsea pumping and other enhanced flow assurance technologies.
Operators may use the updated economic parameters when applying for BSEE’s special case royalty relief program under existing regulations. For a project to qualify for special case relief, the operator must apply and demonstrate that it will use this high-cost technology and that such use is uneconomic under the lessee’s current royalty rate, using the economic assumptions provided by BOEM.
12/04/2020
