The Gulf of Mexico is vast, spreading over some 1.55 million square kilometres. It is also prolific, very prolific. The Gulf still produces around 15% of all US crude, despite the seemingly unstoppable rise of onshore sale output in recent years. But for all of its achievements, there is still a portion of it is yet unexplored. Of that (relatively large) portion, a fraction was leased in the recent US Gulf of Mexico Lease Sales 253. Livestreamed from New Orleans, over 151 tracts covering 835,006 acres of federal waters were parcelled out for US$159 million. So, what does this mean for US Gulf offshore production going forward?
Included in the sale were 14,585 unleased blocks covering both shallow and deepwater acreage, located between 3 to 370km offshore in waters to the depth of 3 to 3,4000 metres in the Western, Central and Eastern Planning Areas. The Bureau of Ocean Energy Management (BOEM) called the sale a success, pointing out that the lease round in August and the earlier March round generated the highest total from high bids since 2015.
That’s couched language. It is true that the March sale drew US$244.3 million across 227 tracts, but the August 2019 one is also down from the lease sale in August 2018, which drew US$178.1 million across 144 tracts. The projected total of all lease sales for 2019 is expected to be US$419.2 million. This would be a sizable increase from the preceding years – US$174.5 million in 2016, US$395.9 million 2017 and US$302.8 million in 2018 – but it should be noted that these were the years when oil prices were depressed. The comparison drawn by the BOEM to 2015 is key; that was when oil prices crashed and the upstream activity in the Gulf fell in tandem. Between 2005 and 2015, average annual lease sales for the Gulf of Mexico averaged US$1.6 billion a year. Leased tracts represented just over 1% of available areas, down from historical averages. So while it is indeed true that the latest lease sales have shown growth, the overall figures are still far from the Gulf’s heyday. And those are past figures that may never be reached again.
But what is clear is that interest remains. The list of top high bidders include some of the world’s largest oil companies (although curiously ExxonMobil is missing). Leading the pack is BHP, which delivered the largest bid for the most popular block – Green Canyon 124 – that constituted over more than half of its total high bids in dollar terms. Chevron, BP, Shell and Total were all represented in the sale, where there was equal interest in both shallow and deep water blocks. Anadarko, which will soon become part of Occidental Petroleum, delivered 14 high bids while Norway’s Equinor maintains its presence in Gulf with 23 high bids. The National Ocean Industries Association called the sale ‘reflective of the cautiously optimistic attitude of an offshore industry still in recovery’, noting that competitive prices for upstream operations were balanced by ‘slow-than-desired improvements in (crude) prices.’
So, while the message coming out of the Gulf of Mexico may be mixed-to-positive, it certainly does confirm that the vast area of sea remains an attractive proposition to the energy industry. At least given the current situation. But with the world bordering on a possible recession, there is every chance that this bet may not yield expected returns in the short-to-medium term. The average breakeven cost for the US Gulf of Mexico deepwater is about US$30/b – the product of several years of US operators slashing costs and optimising operations. WTI currently is currently trading above US$50/b, which gives a good margin even if oil prices trend downwards over the next few years. But what if they fall further? What if the flood of US shale continues to boost global supply higher and higher? What if Saudi Arabia and its OPEC+ allies tire of scaling back production and losing market share in favour of propping up prices? The results of the US Gulf of Mexico Lease Sales 253 shows that the industry is cautiously optimistic that this won’t happen. And are more than willing to continue drilling in hope of that.
Main Bids for US Gulf of Mexico Lease Sale 253
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Many of Indonesia’s oil and gas fields, both on and offshore, are coming to the end of their commercially viable operational lifespan. More than 60% of Indonesia’s oil and more than 30% of gas production comes from late-life-cycle resources spread across the world's largest island country. Despite investment and use of enhanced oil field recovery measures, as well as increasing automation to extend the economic lifespan of these assets, decommissioning will soon become necessary.
However Indonesia, like many countries new to the prospect of decommissioning energy infrastructure, face many key technological, fiscal, environmental, regulatory and industrial capacity issues, which need to be addressed by both government and industry decision makers.
This report, commissioned by the consulting and advisory arm of London and Aberdeen based Precision Media & Communications aims to takes a look at many of the issues Indonesia and other South East Asian oil producing nations are likely to face with the prospect of decommissioning the region's oil and gas aging energy infrastructure both onshore and offshore... To find out more Click here
Headline crude prices for the week beginning 2 December 2019 – Brent: US$61/b; WTI: US$55/b
Headlines of the week
The Global Small-Scale LNG Market is projected to grow from 30.8 MTPA in 2016 to 48.3 MTPA by 2022, at a CAGR of 6.7% between 2017 and 2022. The small-scale LNG market across the globe is driven by their increasing LNG demand from remote locations by applications, such as industrial & power, and the ability to transport LNG over long distances without the need for heavy investment such as pipelines. By terminal type, regasification terminal is expected to grow at a highest CAGR between 2017 and 2022. The increasing demand for LNG from the remote locations and global commoditization of LNG are some of the major factors that are driving the demand for small-scale LNG in this segment.
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The Linde Group (Germany), Wärtsilä (Finland), Honeywell International Inc. (U.S.), General Electric (U.S.), and Engie (France), among others are the leading companies operating in the small-scale LNG market. These companies are expected to account for significant shares of the small-scale LNG market in the near future.
Critical questions the report answers:
Growth Drivers are :
Energy cost advantage of LNG over alternate energy sources for end-users
Heavy duty transport companies save approximately 30% on fuel costs on LNG-fueled trucks, compared to diesel fueled trucks, and produce 30% lower emissions. Air pollution from diesel engines is one of the biggest concerns, especially in areas that struggle to meet air-quality standards. On the other hand, natural gas causes complete combustion and fewer emissions than diesel. It is estimated that increasing environmental concerns from the utilization of diesel vehicles is likely to increase the adoption of green fuel technologies such as natural gas. In the case of electric power generation, natural gas engines below 150 KW are more cost effective than oil fueled engines. Fuel cost is one of the major cost for road transportation, which is strongly subject to excise taxation. Typically, an LNG-fueled Volvo FM truck can travel up to 600 km with LNG. With an additional 150 litres of diesel, it can travel up to 1,000 km without refuelling. Thus, reducing the cost of travel. With additional LNG liquefaction capacity expected to come online in the next few years, an oversupply of LNG is expected, which will drive the price of LNG further lower. Considering all these factors, both developed and developing countries are undertaking feasibility studies to recognize the techno-economics of shifting their economies from diesel to natural gas. Therefore, the cheap price of small-scla LNG over others alterantive fuels will drive the growth during the forecast period.
Small-scale LNG terminals are regarded as facilities, including liquefaction and regasification terminals, with a capacity of less than 1 million tons per annum (MTPA) within the scope of this study. It includes the LNG produced from small-scale liquefaction terminals and regasified at small-scale regasification terminals for catering to applications such as LNG-fueled heavy-duty transport, LNG-fueled ships, and industrial & power generation.
North America small-scale LNG market is projected to grow at the highest CAGR during the forecast period.
The North America small-scale LNG market is projected to grow at the highest CAGR during the forecast period. In North America, most of the small-scale LNG demand in industrial & power applications is met through peak shaving facilities. The peak shaving facilities are used to meet adequate supply of LNG to address the peak demand. In 2015, there were more than 100 peak shaving facilities in the U.S., among which one-half of the peak shaving facilities were located in the Northeast, while a quarter of them were located in the Midwest. Currently, the U.S. has among the highest number of peak shaving plants. However, less than 10% of them are available for any other use due to the current electricity demand. The commissioning of small-scale liquefaction plants can expand the peak shaving capacities in the region.
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Major Market Developments:
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