OTC 2002--Independents Dominate Gulf of Mexico
  by: OilOnline
  Thursday, May 09, 2002

Panelists at the Offshore Technology Conference's presentation of "Independents in the Offshore" concurred that independents hold 80% of leases in the shallow water of the Gulf of Mexico and 50% of deepwater leases. Three panelists, who are members of the Independent Petroleum Association of America (IPAA), depicted various scenarios that were either a challenge to independents working in the offshore or required incentives for independents to continue working offshore.

Panelists outlined three areas where independents faced challenges including the shallow water, deepwater and deep shelf areas. In the shallow water area, independents face areas where there are smaller prospects and higher decline rates. In the deepwater, independents are challenged by longer-term developments, more capital intensive projects and technology issues. In the Deep Shelf area, IPAA panelists said there is greater exploration risk and a higher cost to drill. One panelist suggested that it could cost upwards of $10-$15 million to drill a deep well in the shelf territory.

Key driver of new drilling and production in uncharted territories will be state-of-the-art seismic speculative data, according to one IPAA member. Another panelist said that between 5 and 20 trillion cubic feet of natural gas remains to be recovered in the Gulf of Mexico and that only 5% of total wells in the Gulf of Mexico have been drilled below 15,000 feet.

IPAA panelist members agreed that independents need added incentives to continue successfully and profitably drilling on the continental shelf of the Gulf of Mexico. Members suggested incentives be considered for drilling highly directional wells to access remaining reserves; end-of-life leases and subsalt and deep drilling. Panelists were also concerned about access-related issues. One panelist said that less than 6% of U.S. offshore acreage is open for leasing and that the next five-year plan supervised by the Minerals Management Service does not include any new areas for leasing. Furthermore, he said that more than 300 trillion cubic feet of potential gas reserves remains off limits to exploration, mainly in the Eastern Gulf of Mexico. Of upmost concern, according to one panelist, was the fact that U.S. natural gas production is forecasted to decline from 48 bcf/d to 45.5 bcf/d by the end of this year -- which is not enough to be self-sufficient without imports from Canada.