The Minerals Management Service (MMS) announced two proposed lease sales scheduled to take place on March 16, 2005, covering about 22 million acres in the central and eastern Gulf of Mexico with estimated economically recoverable oil and gas totaling 341-659 million bbl and 1.86-3.64 Tcf, respectively. The agency also released revised lease sale provisions, including rules for new safety/exclusion zones around proposed offshore liquefied natural gas import terminals.

In Central Gulf Lease Sale 194, Vermilion Blocks 139 and 140 will be subject to a new proposed lease stipulation that prohibits exploration and development in a 500-meter safety zone around ChevronTexaco’s proposed Port Pelican deepwater LNG port. The stipulation also would establish an 800-meter exclusion area on the seabed and in the water surrounding the terminal. That area will only be accessible via directional drilling. The 800-meter exclusion zone apparently will be reduced to 500 meters once the terminal enters operation.

MMS also noted that the Coast Guard and Maritime Administration so far has received applications for six offshore deepwater LNG ports, which would receive ships, regasify the LNG offshore and transport the gas onshore via pipelines. There also will be exploration and production restrictions around those terminals.

Central Gulf Lease Sale 194 will include 4,043 unleased blocks covering 21.3 million acres in the central Gulf planning area offshore Louisiana, Mississippi and Alabama. The MMS estimates that the proposed sale could result in production of 276-654 million bbl of oil and 1.59-3.30 Tcf of natural gas.

Eastern Gulf of Mexico Lease Sale 197 will cover 124 unleased blocks (714,240 acres) about 100 to 196 miles offshore in water depths of 1,600 to more than 3,425 meters. Estimates of recoverable hydrocarbons range from 65 million to 85 million bbl of oil and 0.265-0.34 Tcf of natural gas. The proposed eastern Gulf lease sale is the third in the region in the last five years, and the configuration is the same as for lease sales 181 and 189, held in December 2001 and December 2003, respectively.

The two lease sales have other recently revised provisions, including new price thresholds for deepwater royalty suspension. The royalty suspension would end if oil prices were above $39/bbl and gas prices were higher than $6.50/MMBTU at the time of production.

MMS is considering whether to change royalty suspension price thresholds for deepwater oil and gas from an annual system to a monthly system for future deepwater leases. The agency is requesting comments on the desirability and the specific components of the monthly approach. Depending on the comments received and further analysis, it may choose to retain the annual system or adopt the monthly system. A decision will be made for the final notice of sale in February.

MMS said it will continue a royalty suspension of 12 million boe for an eastern Gulf lease in water depths of 1,600 meters or deeper.

©Copyright 2004 Intelligence Press Inc. Allrights reserved. The preceding news report may not be republishedor redistributed, in whole or in part, in any form, without priorwritten consent of Intelligence Press, Inc.