BOEM: Oil and gas production can increase with economic policy changes

New research by the U.S. Bureau of Ocean Energy Management (BOEM), with support from the Bureau of Safety and Environmental Enforcement (BSEE), has indicated that certain economic policy changes are required to increase oil and natural gas production in the Gulf of Mexico (GoM) using deepwater infrastructure already in place.

The study, published on 3 December, evaluated and recommended updating economic parameters used by BOEM’s sister agency BSEE in the evaluation of certain special case royalty relief applications.

Principal deputy assistant Secretary of the Interior Casey Hammond said: “This research provides critical information that demonstrates energy production in the Gulf of Mexico should not be managed with a ‘one size fits all’ approach.

“Promoting robust oil and natural gas production is our obligation to the American public and with the findings from this research, we are better equipped to prevent the stranding of our nation’s valuable energy resources in deepwater”.

This research examined future wells using subsea tiebacks, including extended-reach tiebacks, that require high-cost enhanced flow assurance technologies, such as subsea booster pumps.

BSEE director Scott Angelle added: “Promoting the recovery of the remaining oil and natural gas resources in deepwater is responsible management of our nation’s resources. Protecting the interests of the American public is our responsibility as BOEM estimates 4.5 billion barrels of oil equivalent are in proximity to these deepwater facilities”.

Deepwater oil and natural gas production, in water depths greater than 200 meters, accounts for 92 per cent of total Gulf of Mexico offshore oil production and 14 per cent of all domestic oil produced in the United States. Under the Trump administration, in 2019, facilities in deepwater GoM averaged a record-breaking 1.7 million barrels of oil per day.

BOEM acting director Walter Cruickshank said: “Using BSEE’s initial data, our team identified economic considerations specific to subsea tiebacks requiring enhanced flow assurance technologies. This updated research will provide more opportunity for operators to earn the needed rate of return while minimizing stranded resources.

“America is the top producing nation, thanks in great part to the GoM. Facilitating production in the GoM is critical for our nation’s national security, economy, and American jobs”.

About four out of five deepwater facilities are producing less than 50 per cent of their daily oil production capacity – based on a three-year average of daily production rates.

As noted in the new research, significant volumes of contingent resources exist roughly 30-60 miles from existing facilities. Producing these resources would likely require subsea tiebacks with additional high-cost subsea pumping and other enhanced flow assurance technologies.

Operators may use the updated economic parameters when applying for BSEE’s special case royalty relief program under existing regulations.

For a project to qualify for special case relief, the operator must apply and demonstrate that it will use this high-cost technology and that such use is uneconomic under the lessee’s current royalty rate, using the economic assumptions provided by BOEM.