MMS Initiatives Could Add 1 Tcf/Year of Production by 2004
New initiatives proposed by the Minerals Management Service
could contribute an additional 500 Bcf to 1 Tcf/year of gas
production between 2004 and 2006, according to MMS Director Walt
"There are predictions of serious shortages of natural gas this
winter, including the Northeast U.S.," Rosenbusch noted last week.
Although the initiatives can do little to help the current
situation, they should spur domestic natural gas production as soon
as 2004, he said.
These are "strong initiatives on the part of the MMS to deal
with the large projected increase in gas demand for the nation,"
Rosenbusch added. "Several studies, including the report issued by
the National Petroleum Council, indicate that the nation's demand
for natural gas will grow from the current 22 Tcf of gas to 29 Tcf
of gas in 2010."
The MMS rolled out its gas production enhancement proposal as
part of an announcement for Central Gulf Lease Sale 178. The
initiatives include the following:
An incentive to drill for deep gas deposits located in the
shallow-water shelf area of the Gulf of Mexico by providing for
royalty suspension for the first 20 Bcf of production from a well
drilled below 15,000 feet.
An incentive to drill for natural gas below the thick subsalt
domes. MMS proposes that lessees obtain a two-year extension of the
five-year primary lease term when an operator has drilled a first
subsalt well and needs additional time to image the subsurface data
to determine the appropriate next drilling target. This will avoid
premature lease expiration and the consequent delay in exploration.
In addition, MMS proposes modified initiatives for deep-water
royalty relief, including the following:
An incentive to keep exploring and developing oil and gas
deposits in the ultra deepwater areas to replace the expiring
provisions of the 1995 Deepwater Royalty Relief Act. A royalty
suspension volume of nine million barrels of oil equivalent (BOE)
is proposed for water depths from 800 meters to 1,599 meters, and a
royalty suspension volume of the first 12 million BOE in water
depths equal to or greater than 1,600 meters.
An opportunity to apply for additional 'discretionary' royalty
relief pursuant to new proposed rulemaking if certain conditions
are satisfied. MMS issued a new proposed rule on deepwater royalty
relief in the Federal Register on Nov. 16 (65 FR 69259; see MMS'
web site at
The rule proposes to allow royalty relief on a case-by-case basis
for certain additional categories of OCS leases. It also identified
circumstances in which MMS might consider special royalty relief
outside the establish program.
MMS will conduct public workshops Dec. 12 in New Orleans and
Dec. 14 in Houston to discuss the new initiatives as well as the
provisions in the proposed rule on discretionary royalty relief.
The proposed Lease Sale 178 encompasses 4,366 available blocks
in the Central Gulf Outer Continental Shelf planning area offshore
Louisiana, Mississippi and Alabama. The area covers about 23.07
million acres. The blocks in this lease sale are located three to
200 miles offshore in water depths ranging from four to 3,425
meters. Estimates of undiscovered economically recoverable
hydrocarbons that are expected to be discovered and produced as a
result of this lease sale range from 150 to 440 million barrels of
oil and 1.53 to 4.39 Tcf of natural gas.
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