U.S. To Hold Major Oil & Gas Lease Sale In August

[Swordsmyth]

The U.S. Department of the Interior will hold an oil and gas lease sale for 78 million acres in the Gulf of Mexico on August 15, the department said in a press release. The amount includes all hitherto unleased areas in the U.S. section of the Gulf.
This is the third offshore lease sale under the National Outer Continental Shelf (OCS) Oil and Gas Leasing Program for 2017-2022 out of a total ten for the Gulf of Mexico, to be held at the rate of two per year.
The U.S. OCS in the Gulf of Mexico contains an estimated 48 billion barrels of technically recoverable crude oil as well as 141 trillion cu ft of technically recoverable natural gas. The August tender will include 14,622 blocks at depths ranging from nine to more that 11,000 feet. The royalty rates set by the Bureau of Ocean Energy Management are 12.5 percent for blocks at depths of less than 200 meters and 18.75 percent for all the rest.

More at: https://oilprice.com/Energy/Energy-General/US-To-Hold-Major-Oil-Gas-Lease-Sale-In-August.html

[eleganz]

141 trill, jesus. Earth is amazing.

[Zippyjuan]

Drilling in the gulf is very expensive and for now, fracking is a lot cheaper by comparison (drilling a single hole can cost $1 billion- whether or not it comes up with oil) so the last sale of leases didn't go very well. From March:

https://www.washingtonpost.com/business/economy/oil-and-gas-leases-in-gulf-of-mexico-bring-in-relatively-tepid-bids/2018/03/21/d4dad34e-2d35-11e8-8688-e053ba58f1e4_story.html?utm_term=.af0ab94a019b


Oil and gas leases in Gulf of Mexico bring in relatively tepid bids

Energy companies paid $124.8 million on Wednesday for oil and gas prospects in the largest Gulf of Mexico lease sale ever, but the winning bids fell well short of past sales.

The totals also appeared modest compared with the expectations raised by President Trump in his “America-First Offshore Energy Strategy” that was aimed at substantially enhancing the nation’s “energy dominance.”

Oil companies bid on 148 blocks, just 1 percent of the blocks put up for sale despite royalty breaks the administration provided for some of the shallower areas. The Interior Department’s Bureau of Ocean Energy Management had put 77.3 million acres up for auction.

“The results look especially poor largely because of the exaggerated rhetoric — the ‘energy dominance’ rhetoric — that is the calling card of this administration’s energy policy,” said Michael Bromwich, a lawyer who was the first director of the Bureau of Ocean Energy Management under the Obama administration. “If they hadn’t unrealistically hyped expectations, the results would be less disappointing.”



A similar sale in August also drew relatively tepid winning bids totaling $121 million, about 40 percent less than the Interior Department had hoped.

This sale drew 159 bids from 33 companies, as the biggest firms have trimmed their capital spending budgets from the towering levels a few years ago, when crude prices were higher.

The biggest spenders were the oil giants that already produce lots of oil and gas in the gulf. Chevron made winning bids of $29.4 million on 24 leases, BP bid $20 million for 27 leases, Shell paid $22.9 million for 16 leases, and Total paid $15.1 million for nine leases.

[Swordsmyth]

Drilling in the gulf is very expensive and for now, fracking is a lot cheaper by comparison (drilling a single hole can cost $1 billion- whether or not it comes up with oil) so the last sale of leases didn't go very well. From March:

https://www.washingtonpost.com/business/economy/oil-and-gas-leases-in-gulf-of-mexico-bring-in-relatively-tepid-bids/2018/03/21/d4dad34e-2d35-11e8-8688-e053ba58f1e4_story.html?utm_term=.af0ab94a019b

While the U.S. shale production in the Permian has been grabbing most of the market and media attention over the past two years, the Gulf of Mexico has been quietly staging a comeback.
Big Oil firms, the main operators in the Gulf of Mexico, have been cutting costs and simplifying designs to make offshore projects viable in the lower-for-longer oil price world.
Chevron, Shell, and BP continue with their deepwater developments offshore Louisiana and Texas and have brought down breakeven costs to $40 a barrel or less—comparable with the breakevens at some shale formations onshore. Now operators are vying for new exploration acreage close to existing production platforms that would bring development and production costs down even further.
While the market and media have focused on the record Permian production, the Gulf of Mexico’s production is also expected to hit a record high this year.
But there’s one huge difference between onshore and offshore in terms of resource development—for shale wells, production peaks in several months, while vast deepwater resources can pump oil for decades.


Chevron says that offshore crude oil extraction, including deepwater, is closing in on shale (https://oilprice.com/Energy/Crude-Oil/Offshore-Oil-Closes-In-On-Shale.html) in terms of cost thanks to new production technologies.
“In the past, a lot of the cost of development has been new technology,” Jeff Shellebarger, president of Chevron’s North American division, told Bloomberg. “With the types of reservoirs we’re drilling today, most of that learning curve is behind us. Now we can keep those costs pretty competitive.”
According to Wood Mackenzie, oil and gas production in deepwater Gulf of Mexico is expected to reach an all-time record high (https://www.woodmac.com/press-releases/deepwater-gulf-of-mexico-stages-a-comeback-in-2018/) this year at 1.935 million boepd, of which 80 percent is oil—beating the previous record from 2009 by nearly 10 percent and representing 13-percent growth year over year.
U.S. crude oil production in the Federal Gulf of Mexico increased slightly in 2017 to reach 1.65 million bpd, the highest annual level on record, the EIA said (https://www.eia.gov/todayinenergy/detail.php?id=35732) in April, adding that production is expected to continue growing this year and next, accounting for 16 percent of total U.S. crude oil production. According to the EIA, a total of 10 deepwater Gulf of Mexico field starts are expected in 2018 and 2019.

More at: https://oilprice.com/Energy/Crude-Oi...cord-High.html (https://oilprice.com/Energy/Crude-Oil/Gulf-Of-Mexico-Production-Expected-To-Hit-Record-High.html)