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MMS Sets New RIK Record, Announces Gulf Lease Sale 200

Delivery of gas sold in the largest Minerals Management Service (MMS) royalty in kind (RIK) gas sale to date began April 1. The sale, which concluded in mid-March, provided approximately 118 Bcf of RIK gas to be delivered over seven- or 12-month terms. Gas is being delivered to 14 offshore pipelines originating in the Gulf of Mexico. The amount is equivalent to 509,800 MMBtu/d. Nine companies are buying the gas.

"This sale represents a record in terms of the total volume of RIK gas sold, the number of bids received, and the total number of companies that made offers," said MMS Director Johnnie Burton.

Twenty-one companies submitted 127 offers for the 14 sales packages during the sale. The previous record was set last year when 485,400 MMBtu/d of RIK gas drew 126 offers. Winning bidders this time around included Atlanta Gas Light, Virginia Power, ConocoPhillips, National Energy and Trade, Louis Dreyfus, Shell Trading, Chevron USA, Williams Power, and Total.

Combined with packages in a sale last year, with production recovery from the 2005 hurricane season, and with a recent Wyoming RIK gas sale, this latest sale means that MMS is delivering more than 700,000 MMBtu/d of federal royalty gas.

In the mid-1990s MMS began exploring in kind payment of royalties, or taking its share in the form of commodity rather than in cash for the value of the commodity produced. "Based on the success of those earlier efforts, MMS developed a fully operational RIK program that is being used in tandem with royalties in value when economics indicate that is the best approach," the agency said.

Additionally, MMS issued the proposed notice of western Gulf of Mexico Lease Sale 200, scheduled for Aug. 16. Proposed Lease Sale 200 encompasses about 3,787 unleased blocks covering about 20.4 million acres in the western Gulf Outer Continental Shelf planning area offshore Texas and in deeper waters offshore Louisiana. Blocks are located from nine to about 210 miles offshore in water depths of four to more than 3,435 meters. MMS estimates the sale could result in production of 136-262 million bbl of oil and 0.81-1.44 Tcf of gas.

Recently adopted provisions for the sale include shallow-water, deep gas royalty relief for leases in water depths of less than 400 meters, incentives for ultra-deep wells subject to the rulemaking under the Energy Policy Act of 2005, and an earlier time deadline for electronic fund transfer of bonus and rental payments.

Sale information is available at gomr.mms.gov/index.html.

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