Deepwater

Interior Department’s Minerals Management Service (MMS) is proposing changes to its regulations governing royalty relief for deepwater leases to comply with a 2004 decision of the U.S. Court of Appeals for the Fifth Circuit.

The Department of Interior and Congress should pursue a two-pronged strategy to recover royalties from producers that hold the 1998-1999 deepwater oil and natural gas leases that lack critical price thresholds, according to a report issued by an Interior-commissioned panel.

The Interior Department’s Minerals Management Service (MMS) is proposing changes to its regulations governing royalty relief for deepwater leases to comply with a 2004 decision of the U.S. Court of Appeals for the Fifth Circuit.

The Department of Interior and Congress should pursue a two-pronged strategy to recover royalties from producers who hold the 1998-1999 deepwater oil and natural gas leases that lack critical price thresholds, said a report issued by an Interior-commissioned panel Monday.

The deepwater Gulf of Mexico (GOM) Tahiti project, one of the largest platforms of its kind, will be delayed about a year because of defective shackles in the mooring system, according to project sponsor Chevron Corp. First production is now expected by 3Q2009; it was originally scheduled to ramp up by mid-2008. Estimated production is expected to be about 70 MMcf/d of gas and 125,000 b/d of oil. Construction of the massive project began in late 2005, but a contractor discovered the mooring system problems in June after finding a problem on a similar installation for another producer (see Daily GPI, June 29).

Enterprise Products Partners LP said production through the Independence Hub gas platform in the deepwater Gulf of Mexico has reached approximately 600 MMcf/d from 10 wells. As the initial 15 wells are brought on line, producers expect that production at the Independence Hub will be at or near its capacity of 1 Bcf/d by the end of 2007 (see Daily GPI, Sept. 7; July 23; March 9).

Federal and state agencies have deemed complete Clearwater Port LLC’s deepwater port license application to build a 1.2 Bcf/d offshore liquefied natural gas (LNG) terminal, developer NorthernStar Natural Gas Inc. said last Tuesday.

Federal and state agencies have deemed complete their review of Clearwater Port LLC’s deepwater port license application to build a 1.2 Bcf/d offshore liquefied natural gas (LNG) terminal, said developer NorthernStar Natural Gas Inc. Tuesday.

The U.S. House in late July passed a bill that seeks to recover billions of dollars from producers that hold flawed deepwater oil and natural gas leases that were issued by the Interior Department in 1998 and 1999. The provision was inserted at the last minute in a farm bill, which the House approved by 231-191. It would force holders of the flawed 1998-1999 offshore leases to renegotiate their contracts with the Department of Interior or pay a “conservation of resources fee” in order to bid on future government leases. The fee mirrors one that the House passed during the first 100 hours of the Democratic agenda in January (see NGI, Jan. 22). But the fee was excluded from energy legislation the Senate passed last month. Senate Democrats, however, tried to impose an excise tax on oil and gas companies, which Republicans ultimately defeated (see NGI, June 25). The Senate is not expected to take up its version of the farm bill until after the August recess, but Republican opposition is already mounting to the fee insert. A farm bill “is not the right place to decide this issue,” said Sen. Pete Domenici of New Mexico.