GOM Lease Sale 250 – Results are in!

GOM Lease Sale 250 – Results are in!

The GOM Lease Sale 250 results were reported this morning. As a whole there were 159 bids on 148 tracts, with a total of $124.7MM(US) high bids and $139.1MM(US) total bids. There were 33 companies that participated with 24 walking away with new acreage (Figure 1). More detailed information from the DrillingInfo scouts about each block bid & all awards at the bottom of the article.
Most companies won everything they went after as there was only 7 contested blocks. All had 2 bids with the exception of MC 509 with three bids. The block was awarded to LLOG; the only block they bid solo. There were 10 blocks with joint bids, with LLOG leading the partner game forming alliances with 5 companies for the 250 Lease Sale. Total had the highest bid on MC 697, beating Chevron with their just over $7MM(US) offering. Closest bid was on MC 513, where Hess squeaked it out for an additional $3,001(US)over LLOG and partners Ridgewood & RedWood. The second closest block was fought over by 2 supermajors, MC 787, with $26,744(US) granting Chevron victory over Exxon.


BP came out strong, awarded the most blocks in the sale (27); showing their interest in continuing operations in the GOM. Surprisingly, Anadarko didn’t participate in the sale, while their big competitors BP, Chevron & Shell were highly active. BP and Shell won on all blocks they sought after (27 & 16) while Chevron won 24 and lost 5.
EnVen & W&T offshore showed some strategy change to their current portfolios; participating in the sale yielded 6 & 8 blocks respectively.
Stay tuned for more from DrillingInfo from the GOM area as we will published a GOM Article Series over the next few months covering the happenings in the GOM including results from the upcoming May Mexico lease sale and August 251 lease sale.

Figure 1: GOM Lease Sale 250 block awards by operator.

Figure 1: GOM Lease Sale 250 block awards by operator.

 

Figure 2: Pre-250 block count by operator with the 250 GOM Lease Sale block awards added to the top 25 operators by block count prior to the 250 Lease Sale.

Figure 2: Pre-250 block count by operator with the 250 GOM Lease Sale block awards added to the top 25 operators by block count prior to the 250 Lease Sale. *Fieldwood Energy count includes Noble blocks sold to be awarded after restructuring.

 

Interested in learning more?

Please contact the DrillingInfo GOM Team:

Donald Campbell, Senior Analyst – Frontier North America Donald.Campbell@drillinginfo.com

Tom Liskey, Regional Mgr – Americas Tom.Liskey@drillinginfo.com

Robyn Marchand, Technical Advisor – DrillingInfo  Robyn.Marchand@drillinginfo.com

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US Offshore Drilling Announcement Unleashes Oil & Gas Development Potential

US Offshore Drilling Announcement Unleashes Oil & Gas Development Potential

On January 4, 2018, US Secretary of the Interior Ryan Zinke announced the National Outer Continental Shelf Oil & Gas Leasing Program (National OCS) for 2019–2024. The new plan proposes to make over 90 percent of total OCS acreage available for future exploration and development and targets the largest number of lease sales in US history. The plan is in great contrast to the current program, which puts 94 percent of the OCS off limits. The Draft Proposed Program (DPP) includes 47 potential lease sales—19 off the coast of Alaska, 7 in the Pacific, 12 in the Gulf of Mexico (GoM), and 9 in the Atlantic—during the five-year plan. The DPP is available on the Bureau of Ocean Energy Management (BOEM) website for viewing (https://www.boem.gov/).


Figure 1 - 2019–2024 Outer Continental Shelf Oil & Gas Leasing DPP (Source: BOEM)

Figure 1 – 2019–2024 Outer Continental Shelf Oil & Gas Leasing DPP (Source: BOEM)


The announcement has been touted as a great step toward solidifying the US as a leader in oil and gas production for years to come. However, it is prudent to note that given the recent price levels and how prolific, vast and economic shale resources have proven to be, the focus on the offshore will be limited in the near term. Offshore resources require a long lead time to explore and develop. Given that most of these waters previously remained unexplored and parts have not been developed at all, there will be a long lag time between when leases are awarded and when they lead to production. Shale resources, on the other hand, are much more dynamic and can react to pricing for the purposes of activity given market conditions in the near term. Whereas offshore projects can take more than two years to develop, a shale well can yield first production in as quickly as three months.

Regardless, the leasing program will allow for new exploration and development activity in the OCS and may impact production potential in the longer term. The activity will be led by majors, who have a marked advantage in longer-term projects given the capital requirements. Majors are the leaders in OCS production, and independents remain the leaders in shale (Figure 2). Keeping this in mind, the possible winners might be the majors, but it will all depend on how successful their exploration efforts turn out.

Figure 2 - Top 10 Deepwater Offshore Producers

Figure 2 – Top 10 Deepwater Offshore Producers

Oil and Gas Offshore Rigs: a Primer on Offshore Drilling

Oil and Gas Offshore Rigs: a Primer on Offshore Drilling

Since the Offshore Technology Conference is happening, we’ve been discussing offshore quite a bit this week, and I thought I would explore how offshore drilling works.

Being geographically close to the Gulf of Mexico (GoM), I’m going focus my attention there.

Our recent analysis of top oil producing and top gas producing counties included some big offshore areas. Deepwater areas Green Canyon, Mississippi Canyon and Alaminos Canyon were top twenty for oil production in the US (Green Canyon #1 and Mississippi Canyon #3), and Mississippi Canyon was #25 for gas production.

Recently The Lower Tertiary in the GoM has been in the news with huge potential – 15 billion barrels of oil. Compare that to EIA estimated 29 billion barrels in reserve onshore US, and you have a great exploration opportunity.

To Explore and Produce offshore you need a platform (typically referred to as a rig) from which to drill wells, extract product, and in most cases store the oil or gas until it can be transported to refineries or other destinations.

[Drillinginfo’s Terry Childs does a weekly roundup of offshore activity over on Oilpro, and was a huge help in putting this post together. Thanks, Terry!]

Where to drill

The Geology of the GoM is largely Jurassic and Cretaceous, when the basin encouraged collection and evaporation of sea water, leaving behind accumulations of Salt and Gypsum, which then domed and trapped abundant hydrocarbons.

Levin 8e/Wiley fig 13-8 w293 Offshore Rig
Source: http://higheredbcs.wiley.com/legacy/college/levin/0471697435/chap_tut/chaps/chapter13-04.html

How are leases structured?

The Submerged Lands Act (SLA) of 1953 grants individual States rights to the natural resources of submerged lands from the coastline to no more than 3 nautical miles (5.6 km) into the Atlantic, Pacific, the Arctic Oceans, and the Gulf of Mexico. The only exceptions are Texas and the west coast of Florida, where State jurisdiction extends from the coastline to no more than 3 marine leagues (16.2 km) into the Gulf of Mexico.

Source: http://www.boem.gov/Federal-Offshore-Lands/

State and federal ownership of the seabed:

776px-OffshoreOwnershipBoundaries Offshore Rig
Source: http://en.wikipedia.org/wiki/File:OffshoreOwnershipBoundaries.jpg

Beyond the state boundaries in the GoM there are Offshore Protraction Areas that are further subdivided into blocks that go up for bid from the federal government.

gomdistrict-boundries Offshore Rig
Source: http://www.energyeconomist.com/a6257783p/GOM/Gustav_Ike.html

According to the following BOEM chart, most of the big money bids were in the 70s and 80s, but sale number 222 in 2012 netted $157 million for lease G34456 in the central district!

TopTenLeasesGoM Offshore Rig
Source: http://www.boem.gov/Top-Ten-Highest-Bids-on-a-Single-Block-for-All-Gulf-Sales/

What types of Rigs are there?

There are three primary rig types. Jackups, semisubmersibles and drillships make up the majority of the offshore rig fleet and all are used worldwide. Other rig types such as platform rigs, inland barges and tender-assisted rigs are used as well, but they are fewer in number and are generally used in specific geographic areas.

  • Jack-ups – Used for shallow water drilling, there are two jackup types; independent-leg jackups make up the majority of the existing fleet. They have legs that penetrate into the seafloor and the hull jacks up and down the legs. Mat-supported jackups are presently used only in the U.S. GoM. As the name implies, the mat rests on the seafloor during drilling operations. Cantilever jackups are able to skid out over the platform or well location, while slot units have a slot that fits around a platform when drilling development wells.
  • Semisubmersibles – Used for deepwater drilling, these floating rigs have columns that are ballasted to remain on location either by mooring lines anchored to the seafloor or by dynamic positioning systems. They are used for both exploratory and development drilling.
  • Drillships – Also used for deepwater drilling, these ship-shaped floating rigs move from location to location under their own power. They are capable of operating in more remote locations and require fewer supply boat trips than do semis. They are maintained on location via dynamic positioning systems, and most of the rigs currently under construction are drillships.
  • Platform Rigs – These are self-contained rigs that are placed on fixed platforms for field development drilling. Some are called self-erecting and can be rigged up in as little as a few days. Other larger units require a derrick barge to be installed and can take up to two weeks to be rigged up. Once drilling is completed, the rig is removed from the platform.
  • Tender-Assist Rigs – There are only about 25 of these rigs left in existence, used mostly in West Africa and Southeast Asia. They are monohull units that are moored next to a platform. The rig is then installed onto the platform, while all the power, storage and other functions remain on the tender.
  • Inland Barges – These rigs are specially adapted for inland waters close to shore. They are used in the GoM as well as other areas of the world.

What are the components of an Offshore Rig?

This image shows some of the major components of an offshore semisubmersible rig:

5-mars4 Offshore Rig
Source: http://www.boem.gov/2012-2017-Lease-Sale-Schedule/

  • Hull – initially rigs were built out of tanker hulls, so the terminology remains
  • Power Module – converts available fuel into power for the station
  • Process Module – onboarding and offloading of supplies and products
  • Drilling Module – the traditional drilling rig apparatus
  • Quarters Module – where the crew sleeps and eats
  • Wellbay Module – access to the well and other equipment
  • Derrick – the oil derrick

Who builds Offshore Rigs?

There are several shipyards around the world that build offshore rigs. Most of the major yards are in Southeast Asia and the Far East and there are other facilities in the Middle East and others being established in Brazil. Samsung Heavy Industries in Korea, and Keppel Corporation in Singapore are two of the larger rig builders in the world..

How are Rigs moved?

Tugboats are used to move jackups and semis for infield moves. When rigs are moved from one geographic area to another, usually a heavy-lift vessel is deployed, commonly called dry-tow. In some cases, semis might be what is called wet-towed, in which the rig is towed while in the water. Of course, drillships move under their own power in any situation. As one can imagine, it can be a pretty big production to move a rig from one area to another – a new rig being built in Singapore will take 90 days to reach the GoM.

Who hires and runs Offshore Rigs?

Operators
Obviously oil companies are the ones that hire an offshore rig. In the Gulf of Mexico, super-majors BP, Chevron, ExxonMobil, Shell and ConocoPhillips all have rigs under contract, and large independents such as Anadarko Petroleum and Fieldwood Energy (formerly Apache) are extremely active. In many instances, companies will partner in hiring a rig, with each operator involved getting the rig for a set number of wells or days.

Staffing
The Offshore Installation Manager (OIM) has the executive authority on a rig during his shift. Beyond that, there are various other positions, all with very specific roles to play in order to keep the rig running smoothly. The number of crew personnel on a rig varies between rig types and where the rig is operating. There can be as few as 50 and as many as 200. Given that there are currently over 200 rigs being built, one of the problems facing the industry today is how they are going to be staffed. Obviously, some of the people will come from older rigs that are retired over time and the crew is simply is transferred to a new rig. However, there is still a large people shortage coming. Oilpro.com looked at the current rig fleet age along with projected staffing requirements for newbuild rigs.

original Offshore Rig
Source: http://oilpro.com/post/4004/deepwater-drilling–you-must-hire-before-you-retire

How deep do Offshore Rigs drill?

Depending on the rig type, offshore rigs are rated to drill in water depths as shallow as 80 feet to as great as 12,000 feet. The greatest water depth a jackup can drill in is 550 feet, and many newer units have a rated drilling depth of 35,000 feet. On the floating rig side, the deepest water depth in existence today is 12,000 feet. A handful of these rigs have a rated drilling depth of 50,000 feet, but most of the newer units are rated at 40,000 feet.

Services?

How do they get supplies to an offshore rig? Supply boats is the answer. These vessels make regularly scheduled trips to and from the rigs, bringing necessary equipment, food and other supplies. Crews are generally transported by either helicopter or crew boats, depending on how far the trip is.

How do they get production out? Oil and/or natural gas production is connected by a flow line to another facility or connects into a large diameter trunk line that is heading to the onshore location for processing. Newer technology involves a Floating Production System Offloading (FPSO) which can store oil in its hull where it is later transported to shore. While this is a proven technology around the world, it is just now starting to be used in the GoM.

pipelines Offshore Rig
Source: http://www.eoearth.org/view/article/153197/

International Distinctions?

Although in this post I focused on the GoM, our DI International products have annotated bid blocks, scouting reports, and extensive editorial information for round the world offshore opportunities. If you’re curious about Angola or the North Sea or Vietnam, we can help you navigate.

Your Turn

What do you think? What have you always wanted to know about offshore drilling? Like me, do you want to visit an oil rig? Leave a comment below.