The Minerals Management Service (MMS) on Friday published a final rule in the Federal Register to allow Suspensions of Operations (SOO) in certain circumstances, which it said will encourage oil and natural gas lessees or operators to drill ultra-deep wells — deeper than 25,000 feet true vertical depth below the ocean surface — on the Outer Continental Shelf. The SOO rule, which would temporarily stop the clock on the lease term to prevent the lease from expiring, is scheduled to take effect Jan. 17.

“Information from industry indicates that large accumulations of hydrocarbons may exist at ultra-deep levels below the ocean surface,” said MMS Director Johnnie Burton. “Many companies are reluctant to drill to these depths without additional data analysis, which can be costly and time consuming. MMS expects that allowing for SOOs will result in increased domestic production by offsetting the added complexity and cost of drilling ultra-deep wells.”

Usually, when a lease reaches the end of its primary term, the lessee must be producing or conducting other leaseholding operations to extend the lease beyond its primary term, according to MMS. However, MMS said the added “complexity and cost” associated with planning and drilling an ultra-deep well may require more time for exploration and development. In such cases, the lease term could be extended through an SOO.

Although some leases with 10-year primary terms are issued in deep water, they are not covered by the final rule; MMS said 10 years is sufficient to explore and develop such deep prospects. To view the circumstances under which an SOO may be granted, visit www.mms.gov, or read the Register notice in Vol. 70, No. 241, 12/16/05, pp.74659-74663.

©Copyright 2005Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.