OCS 'frontier' future examined at DOT

Gene Kliewer,
Technical Editor, Subsea & Seismic

NEW ORLEANS -- Expanding exploration into previously restricted areas of the US outer continental shelf was the topic of the panel discussion that opened the second day of the Deep Offshore Technology International Conference & Exhibition.

Panelists were David Dismukes, associate director and professor, Center for Energy Studies at Louisiana State University; Kevin Kennedy from the Center for Energy Research; Sidney Coffee with America's WETLAND Foundation; and J.P. Chevriere of Transmar Consult Ltd.

Dismukes noted that currently the Gulf of Mexico yearly produces some 490 MMbbl of oil and 3 tcf of gas, accounting for 23% and 14%, respectively, of all domestic US production. Further, he said, this resulted in $32 billion a year over the last five years of income to the Federal government, second only to the Internal Revenue Service. However, the GoM is a mature producing area and these totals will decline without oil company access to additional parts of the OCS. These previously restricted areas, Dismukes said, are estimated by the US Department of Energy to contain 18 Bbbl of oil and 77 tcf of gas, equivalent to 30-years of consumption.

For the oil companies to take the risks involved in exploring these new areas, Dismukes said they have to make long-term commitments and to do so need not just access, but consistent governmental policies to support the development.

Kennedy pointed out that exit polls of American voters had indicated 70% favored further development of domestic petroleum resources but that the biggest hurdle to that development was in Washington, D.C. He said the specific obstacles appeared to be changes in royalty rates, increased taxes, and regulations that would shut-in about one-third of the current wells. On the plus side, he said the additional OCS development would add good, high-paying jobs.

Coffee said that OCS development would be supported by shore-based infrastructure and that the infrastructure required sound environmental platform from which to operate. America's WETLAND Foundation has organized America's Energy Coast covering the states of Texas, Louisiana, Mississippi, and Alabama to form a coalition of economic, environmental, and energy interest "to educate America, shape public policy, and speak with a shared voice in Washington" to achieve a sustainable Gulf Coast. One example of the group's efforts is a successful campaign to amend Louisiana's state constitution to dedicate the state's share of federal OCS income to hurricane restoration and coastal protection.

Wrapping up the panel, Chevriere examined the possible impact on OCS activities caused by the current financial circumstances. He said different players would be affected differently. The major oil companies historically are 80% self-funded, he said, while independent operators historically were 80% outside funded. This means the majors could continue to pursue prospects while the independents could expect difficulty in financing operations. This could affect OCS in that the independents, for the most part, dominate shallow water development while the majors dominate in deep and ultra deepwater. A cautionary factor in deepwater, however, is the low oil prices which give little incentive to assume the larger risks. The big question, he said, would be the duration of the issue, but that the industry "will find a way to exploit the OCS despite the crisis."

02/04/2009