New MMS RIK Program Set for Spring
The Department of the Interior's Minerals Management Service
(MMS) announced a continuation of the Outer Continental Shelf
royalty-in-kind (RIK) pilot program last week and has doubled the
amount of gas previously offered. Nearly 500 MMcf/d of production
will go on sale this spring, the MMS said. Details for the sale are
still being finalized.
The MMS will request bids for the gas produced at the platform
in exchange for gas delivered to an onshore pool. This new offer
will be the fourth RIK pilot program held by the MMS. The pilots
are being used to determine the best method and most economic
locations in the market for taking royalties in kind rather than in
More than 200 MMcf/d will be newly-offered capacity and more
than 265 MMcf/d is currently under contract. The contracts will
expire March 31. While the new capacity will be offered through the
Bluewater and Sea Robin systems, the contracted capacity will be
dedicated to the Stingray, Pelican, High Island Offshore, and
Transco North High Island systems.
The gas from this pilot will be delivered to the General
Services Administration (GSA) for distribution to government
agencies and sale of any excess volumes. The MMS currently does not
have the manpower to manage transportation of such a large amount
of royalty production, but depending on the economics it may add
the staff in the future.
"We added production to this pilot. And while the GSA will
contract for the same amount it did last time, [the MMS] plan on
selling the excess volumes into the open onshore market," said Bonn
Macy, an MMS spokesman. "That is one of the big differences between
this spring offering and the previous pilot."
The last offering was held in October of 1999. Duke and Dynegy
won contracts to transport 65 MMcf/d and 133 MMcf/d respectively
(see NGI, Nov. 8) for delivery to the GSA. The goal is to get 800
MMcf/d of royalty gas allocated by the fall, Macy said. Overall,
the MMS' royalty share of Gulf production is 2.5 Bcf/d.
The GSA is currently transporting some of its production from
the wellhead in a different pilot in the Gulf offshore Texas, which
is being conducted with the Texas General Land Office. The MMS is
selling some of its royalty gas out of the Texas area through a
The invitation for bids will be posted on the MMS web site by
Jan. 21. A tentative list of properties that are being considered
for this sale is available at http://www.mms.gov.
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