Natural gas production from the deep water Gulf of Mexico hasincreased 252% over the last five years, from 159 Bcf in 1994 to560 Bcf in 1998, according to the Department of Interior’s MineralsManagement Service.

The increase in deep water production bolstered overall GOMfigures from the 1994 total of 4.8 Tcf to 5.01 Tcf in 1998. Thetotal Gulf production last year, however, was off about 107 Bcffrom 1997’s 5.16 Tcf. The deep water increase from 382 Bcf in 1997to 560 Bcf in 1998 helped mitigate the 286 Bcf decline in shallowwater 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 Gulfof Mexico producers is changing with larger companies concentratingon the deep water, while independents focus on prospects closer tothe shore.

MMS also reported oil production from deep water Gulf areas hasrisen 279% in the last five years from 115,000 b/d in 1994 to436,000 b/d in 1998, also mitigating an overall decline in oilproduction.

Rosenbusch credited the deep water Royalty Relief Act withencouraging the more expensive deep water drilling programs. “Therehas been growth of tremendous proportions in the number of activeleases” since the program was installed, he told reporters in hisfirst briefing since taking office last May.

Noting that royalty relief expires in Aug. 2000, Rosenbusch saidthe MMS has asked industry what needs to be done going forward toencourage deep water drilling. It’s not clear that any furtheractions are necessary on the part of the MMS since the industry nowhas a large inventory of leases to work off and there are two moredeep water lease sales before next August.

Rosenbusch said he is dedicated to continuing the MMS as thebest resource manager in the world, and to the ongoing effort tore-engineer the department’s royalty management program. “We wantto reshape and retool to be parallel with where the industry is. Weare looking at new philosophies, new techniques and approaches toroyalty valuation and royalty management.”

One of the new techniques is the royalty-in-kind (RIK) pilotprojects currently underway for gas and oil. Questioned, he saidthe MMS had no dates in mind for putting full-fledged programs intoeffect. He noted the three programs underway were testing variousaspects of the process and cautioned that RIK was “not an option inall instances……We’re looking at a variety of scenarios andcontinuing to develop and refine the process. There are reasons whycould do it, and reasons why shouldn’t do it. This is part of there-engineering. We’ll continue to look at other ways to do RIK.”

Rosenbusch, who served for a time with the Texas General LandOffice, said he generally had a positive relationship with the oiland gas industry.

Ellen Beswick

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