In May 2022, the Biden Administration cancelled two lease sales (259 and 261) in the Gulf of Mexico (and 258 in Alaska), citing “conflicting court rulings” for the Gulf of Mexico lease sales. In a separate move, in June 2022, Republican-governed states asked a court to restore Lease Sale 257, the largest offshore oil-and-gas lease sale in U.S. history, which had been vacated earlier this year by federal Judge Rudolph Contreras. The US Gulf of Mexico is the 2nd largest oil-producing basin in the United States.
Bad news : Detrimental to US oil industry
The 257-auction had, rather controversially, been opened in November 2021 covering 80 million acres (over 320,000 sq. km) just four days after the landmark COP26 Climate Conference in Glasgow, UK. The sale represented the largest-ever oil and gas lease offering, covering an offshore area of almost half of the North Sea (570,000 sq. km).
The environmental groups immediately started showing concerns and in January 2022, a US federal judge blocked the sale of the leases, ruling that Joe Biden’s administration “did not properly consider the lease’s impact upon the climate crisis”.
There is concern and nervousness in the USA that investment dollars will now move “overseas” to the detriment of the USA oil and gas industry. The delay precludes the ability to have these sales before the National Outer Continental Shelf (OCS) Oil and Gas Leasing Programme expired on 30 June 2022 and this means that lease sales won’t resume, it is expected, until late 2023. Once the programme lapses, no offshore leases can be issued until a new plan is in place. The federal government is legally required to create a new plan, but the Biden administration has yet to propose one.
Good news : A giant
Meanwhile, the Mexican government has announced that it is close to reaching a deal with Houston-based Talos Energy (founded in 2012) over the future unitization of the Zama oil field located in the southern part of the Gulf in the Sureste Basin in Mexico.
The field is reported to be around 900 MMbo in size and was discovered in 2017 in Block 7. Following successful appraisal drilling, the accumulation was found to extend into a neighbouring block operated by state-run Petróleos Mexicanos (PEMEX).
In July 2020 Talos Energy received a notice from Mexico’s Secretaría de Energía (Ministry of Energy or SENER), instructing the Block 7 Consortium and PEMEX to unitize the Zama Field. Talos’s partners are Harbour Energy and Wintershall Dea.
Good news : Significant discoveries
The US side of the Gulf of Mexico has been the venue of a number of significant discoveries over the last 18 months or so. These included Puma West (BP, operator), Leopard (Shell), Black Tip North (Shell) and Winterfell (Beacon Offshore Energy).
Other positive news on the USA side of the Gulf was the announcement in May 2022 that Chevron had approved the development of the deepwater Ballymore project and expects to achieve first production from the field in 2025. Ballymore was discovered in 2018 and is expected to produce up to 75,000 barrels of oil a day. This follows from LLOG Exploration Company announcement of the proposed Leon-Castile deep-water development. First production from the development is expected by mid-2025.
IAN CROSS – MOYES & CO
