Sharp Increase in Deep-Water GOM Production
Natural gas production from the deep water Gulf of Mexico has
increased 252% over the last five years, from 159 Bcf in 1994 to
560 Bcf in 1998, according to the Department of Interior's Minerals
The increase in deep water production bolstered overall GOM
figures from the 1994 total of 4.8 Tcf to 5.01 Tcf in 1998. The
total Gulf production last year, however, was off about 107 Bcf
from 1997's 5.16 Tcf. The deep water increase from 382 Bcf in 1997
to 560 Bcf in 1998 helped mitigate the 286 Bcf decline in shallow
water production between the two years.
"The 1998 increase is significant and of national importance,"
said new MMS Director Walt Rosenbusch. He noted the profile of Gulf
of Mexico producers is changing with larger companies concentrating
on the deep water, while independents focus on prospects closer to
MMS also reported oil production from deep water Gulf areas has
risen 279% in the last five years from 115,000 b/d in 1994 to
436,000 b/d in 1998, also mitigating an overall decline in oil
Rosenbusch credited the deep water Royalty Relief Act with
encouraging the more expensive deep water drilling programs. "There
has been growth of tremendous proportions in the number of active
leases" since the program was installed, he told reporters in his
first briefing since taking office last May.
Noting that royalty relief expires in Aug. 2000, Rosenbusch said
the MMS has asked industry what needs to be done going forward to
encourage deep water drilling. It's not clear that any further
actions are necessary on the part of the MMS since the industry now
has a large inventory of leases to work off and there are two more
deep water lease sales before next August.
Rosenbusch said he is dedicated to continuing the MMS as the
best resource manager in the world, and to the ongoing effort to
re-engineer the department's royalty management program. "We want
to reshape and retool to be parallel with where the industry is. We
are looking at new philosophies, new techniques and approaches to
royalty valuation and royalty management."
One of the new techniques is the royalty-in-kind (RIK) pilot
projects currently underway for gas and oil. Questioned, he said
the MMS had no dates in mind for putting full-fledged programs into
effect. He noted the three programs underway were testing various
aspects of the process and cautioned that RIK was "not an option in
all instances......We're looking at a variety of scenarios and
continuing to develop and refine the process. There are reasons why
could do it, and reasons why shouldn't do it. This is part of the
re-engineering. We'll continue to look at other ways to do RIK."
Rosenbusch, who served for a time with the Texas General Land
Office, said he generally had a positive relationship with the oil
and gas industry.
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