Offshore update

Mar. 2002 Vol. 223 No. 3  Offshore Update

Robert E. Snyder,  Contributing Engineering Editor

Eastern GOM Sale 181 bid evaluations. The U.S. DOI’s Minerals Management Service (MMS) announced on January 29 completion of the bid evaluation process for Lease Sale 181, held December 5, 2001. There were 95 tracts receiving bids, and MMS awarded 95 leases totaling $340,474,113 in high bids. All were in water depths greater than 1,600 m (5,249 ft) – the deepest tract bid was Lloyd Ridge Block 446 in 9,538-ft water.

The highest bid accepted on a tract was for $26,015,040 by Anadarko for Lloyd Ridge 91; the second highest for $22,135,759 by Shell for Lloyd Ridge 399; and the third highest by Shell for $21,111,888 for Lloyd Ridge 446. Seventeen companies participated in the sale. The top four in terms of dollars spent were: Shell (28 tracts); Anadarko (26); Kerr-McGee (16); and Marathon (14).

Of the 233 tracts comprising some 1.3 million acres offered, MMS received 190 bids on 547,000 acres. This is the first time tracts have been offered in the Eastern Gulf since 1988. Despite the fact that the sale ended up offering just a quarter of its original size in July, it was one of the most competitive in recent times.

MMS approves FPSOs for the U.S. Gulf. As reported in the Gulf of Mexico Newsletter of January 7, Central and Western Gulf of Mexico operators now have an additional option to develop deepwater fields in the region. MMS approved FPSO use to exploit oil reserves in areas of the GOM that may "challenge or exceed current infrastructure or technology."

The decision was reached after the agency performed an extensive environmental impact statement (EIS) and conducted public policy hearings. The EIS examined use of permanently moored, double-hulled, ship-shaped FPSOs with up to 1 MMbbl storage capacity. However, each field development proposal will still be evaluated on a case-by-case basis.

Some areas remain off-limits to FPSO-based developments, e.g., the decision excludes use of the systems in a 471-block area located just off the Continental Shelf, from Galveston to New Orleans. The U.S. Coast Guard prohibits lightering operations in this area, and MMS will not approve FPSOs in the area for a period of two years while it continues discussions with the Coast Guard.

And, less than a month after this decision was announced, Unocal was considering an FPSO for its Trident discovery development in Alaminos Canyon Block 903. The company indicates that it will probably use FPSO technology to develop the reservoir, making it the first GOM operator that has said it would likely utilize an FPSO to develop a specific GOM field. The company recently completed its first appraisal on the field, drilled to a TD of 20,500 ft by TransoceanSedcoForex’s Discoverer Spirit drillship in 9,727 ft of water.

Final rule on deepwater royalty relief. The U.S. DOI has issued a final rule on new procedures for obtaining royalty relief for certain offshore federal deepwater leases. The rule was published in the January 15 Federal Register. It will allow some lease operators to apply for additional discretionary relief where royalty relief in the lease term is insufficient and the marginal nature of the project will preclude its further development. It will shorten the processing time for evaluating future applications and reduce time needed by operators to prepare applications for new leases.

This rule is one in a series of several steps being undertaken by DOI to carry out recommendations made to the President under the National Energy Plan Study. The rule applies to leases issued before 1996 and after 2000 for all areas in the Gulf lying west of the Florida-Alabama boundary. For leases sold after 2000, MMS will consider applications from lessees that may already have some royalty relief, but need additional amounts to be economical.

Also, applications will now focus on development projects on a lease basis rather than on the more difficult – to-define basis of geologic fields. Upon approval of an application, the amount of relief will be directly related to the economic viability of the project, as presented by the operator and evaluated by MMS scientists and economists.

Busy year ahead for the UK. Government go-ahead for development of three new oil fields in the North Sea is expected to lead to the recovery of 60 MMbbl oil and about 100 Bcf gas. Announcing approval for what are known as the Madoes, Mirren and Maclure oil fields, Energy Minister Brian Wilson said the developments would involve an investment of more than 200 million pounds sterling.

In all three cases, the fields are satellites of existing Central North Sea fields. Mirren, discovered in 1992 and operated by BP in partnership with Shell, Agip, MOC and ExxonMobil, will be a two-well subsea project linked to an existing pipeline. Madoes, also operated by BP with partners Shell, Arco, Agip and ExxonMobil, was found in 1997 and will be developed via three wells, again linked to the same pipeline. Maclure, discovered in 1991, will be a single well, operated by BP on behalf of partners Kerr McGee, Amerada Hess, ExxonMobil Enterprise and OMV.

The Minister has also authorized new developments in the UK’s oldest offshore oil field, Argyll, which went into production in 1975, but was abandoned 10 years ago. At that time, fewer than 40% of its oil reserves had been retrieved. Two UK companies new to the industry, Tuscan and Acorn, are to reopen the field using technology not available in 1992. This will include horizontal wells to target oil inaccessible to the original development wells; the technology application will also reduce water production.

Wilson said, "These are exactly the kind of investments we have been aiming for to extend the life of the North Sea and thus maintain production and employment. Tuscan and Acorn will use the latest technology and important new alliances to reopen Argyll. Subsequently, they should be able to reopen the old Duncan and Innes fields too, both of which were abandoned at the same time as Argyll."

Further developments in the North Sea include approval for the U.S.’s ATP and CalEnergy to take a fresh look at a gas discovery that has been lying fallow for the past 10 years. The government has announced a new licensing round for the exploration of new areas of UK waters. The 20th Round invites applications from companies to initiate exploration efforts over 270 whole or part blocks of the Southern, Central and Northern North Sea.