Nine companies were awarded contracts to deliver more than 91.6 Bcf, or 271,300 MMBtu/d, over five- or 12-month terms in the Minerals Management Service (MMS) royalty-in-kind (RIK) natural gas sale held earlier this month.
Twenty-one companies tendered a total of 175 offers for the RIK gas, and nine companies were awarded contracts for the 13 sales packages offered. Winning bidders include Bear Energy LP, BG Energy Merchants, ConocoPhillips, Louis Dreyfus Energy Services, National Energy and Trade LP, PPM Energy Inc., Sequent Energy Management LP, United Energy Trading LLC, and Williams Power Co.
The gas will be delivered beginning Nov. 1 to 13 offshore pipeline systems originating in the Gulf of Mexico (GOM) and will be destined for consumer and industrial use in the continental United States. The gas volume is enough to supply the average needs of nearly 1.2 million U.S. homes for one year.
“These RIK sales continue to generate tremendous benefits to the U.S. government,” said MMS Director Randall Luthi. “Improved government efficiencies, shorter compliance cycles and increased revenues represent just a few of the benefits of the RIK program.”
At the current gas price of about $7/MMBtu, the sales would equate to about $641 million in total gross revenues. Actual revenues will vary based on gas prices over the life of the contract. The gas sold in the RIK sale involves an aggregation of gas royalties taken “in kind” in the form of product, rather than “in value” or cash payments, from offshore federal leases in the GOM. MMS then sells the gas competitively in the open marketplace.
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