Interest ticks up in US lease sale: Correction

  • Market: Crude oil, Natural gas
  • 20/03/19

Corrects BP's high-bid total

The latest auction for oil and natural gas leases in the US Gulf of Mexico generated $244mn in high bids today, almost double last year's total but still below amounts generated before the surge in onshore shale exploration.

The lease sale resulted in 227 high bids from 22 companies — a smaller set of participants compared with the March 2018 lease sale even though the sale revenue was higher. The winning bids cover just a fraction of more than 78 million acres (316,000 km²) area offered, at 1.3mn acres.

Norway's Equinor submitted the highest bid, at $24.5mn, for a Mississippi Canyon block. Shell submitted the highest number of high bids, 87, for a total of almost $85mn. US independent producers Anadarko and Hess were the next highest bidders by the dollar amount of high bids, with $24mn and $18mn respectively. BP had 23 high bids for $15.5mn, including one submitted jointly with LLOG Exploration. Total submitted two high bids for a total of $15mn.

The Interior Department's Bureau of Ocean Energy Management (BOEM) offered acreage in federal waters offshore Texas, Louisiana, Mississippi, Alabama and Florida. That kept up the recent practice of offering all available acreage for offshore development, instead of holding sales separately in the western, central and eastern parts of the Gulf.

The lease revenue from Gulf-wide sales remains below pre-2015 levels. The lease sale, for example, for the central part of the Gulf raised $851mn in March 2014 and $539mn in March 2015. But the drop in oil prices in 2014-16 and a shift in exploration to shale formations onshore have since tempered interest in US offshore development.

BOEM said it was satisfied with today's results, noting the increase in bids compared with 2018.

"We have anticipated a continued trend on the upward side as oil prices have been stabilized and our system allows for predictability so people can plan ahead," BOEM Gulf of Mexico regional director Mike Celata said. Celata added that 213 of the leased tracts had previously been released by companies. "What you are seeing is companies looking at prospects they looked at in the past and deciding to go back and pick up some more acreage for their portfolio."

Industry groups also sounded upbeat about today's results. "Gulf of Mexico Lease Sale 252 allowed the federal government to check the temperature of the offshore industry in the US Gulf of Mexico in the face of the slow pace of recovering commodity prices," National Ocean Industries Association president Randall Luthi said. "The trajectory of this and the past few sales shows stability and helps establish a new normal for the US offshore industry."

But the lease also shows producers continuing to invest in existing operations in both shallow and deep water in known geologic areas, rather than committing to new deepwater projects, Luthi said.

The administration views giving producers greater access to offshore and onshore federal resources as one of the few tools for achieving its goal of spurring greater US production of oil, natural gas and coal. "In a market economy like the US, with a competitive energy sector, opportunities to increase access to production are limited, except for perhaps on federal land," White House Council of Economic Advisers said yesterday in its annual report. The federal government directly controls only a portion of US fossil fuel resources, limiting its ability to "simply turn up the tap on production," the report notes.

Crude oil production in the US Gulf federal offshore areas was 3.1pc higher year-over-year at 1.73mn b/d in 2018, according to the Energy Information Administration. Total US crude production in the same period was up by 17pc to 10.95mn b/d in 2017 and is projected to grow by another 12pc this year to 12.3mn b/d.

Onshore shale plays remain the focus for US exploration and production activity. The US rig count as of last week was 1,026, an increase of 36 — 3pc — increase on the year, according to Baker Hughes data. The rig count in the Gulf of Mexico was only 22 as of last week, or 9 rigs more than a year earlier.


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27/03/24

Louisiana pipeline crossing bill nears vote: Update

Louisiana pipeline crossing bill nears vote: Update

Updates scheduled timing of vote in first paragraph. New York, 27 March (Argus) — The Louisiana state senate is scheduled to vote next week on a bill seeking to clarify pipeline servitude rights and expedite pipeline crossing disputes, advancing legislation promoted by three natural gas pipeline companies involved in a legal battle with US midstream giant Energy Transfer. Natural gas transmission projects by Williams, Momentum Midstream and DT Midstream — which aim to connect growing production out of the prolific Haynesville shale to a wave of new LNG export terminals along the US Gulf coast — have been put on hold while legal proceedings between Energy Transfer and DT Midstream play out. All three companies' proposed pipelines would cross Energy Transfer's own Tiger pipeline in northern Louisiana. The three pipeline companies' projects propose an excessive number of crossings over the Tiger line, an attorney for Energy Transfer argued in a Louisiana senate committee last week, and Energy Transfer has the servitude rights to stop them. But Energy Transfer's "unique" interpretation of the civil code on pipeline crossings is hurting the economy of Louisiana, the author of the bill , Louisiana senator Alan Seabaugh (R), said last week. By blocking the construction of new pipelines out of the Haynesville, Energy Transfer is eliminating jobs and taxes that would be created by new infrastructure, he said. Moreover, by arguing its servitude rights extend above and below its existing pipeline "to the center of the earth," Energy Transfer is "asserting a right that nobody has ever asserted before," Seabaugh said. The Seabaugh bill clarifies that, unless explicitly stated otherwise in a contract, pipeline servitude rights extend only to the physical space occupied by the pipeline and any space necessary to maintain it. The contract stipulating Energy Transfer's servitude rights for the Tiger pipeline is silent on the subject of that vertical, underground space, according to bill supporters. "This really isn't about pipeline crossings — this is about controlling market share," said Jimmy Faircloth, attorney for Momentum Midstream. But the pipeline industry has been amicably working together for decades to allow for reciprocal crossings, Energy Transfer attorney Kay Medlin said. By ripping up this convention over a dispute involving so many crossings, and forcing an expedited legal proceeding for something which "is not a minor process," the Seabaugh bill threatens an industry "that ain't broke," she said. "This legislation will break it, and you will likely spend years trying to fix it, if you ever can," Medlin said. The Seabaugh bill is a companion to two bills which passed 100-0 and 99-0, respectively, in the Louisiana House of Representatives on 21 March. Those bills seek to clarify the law on pipeline crossings and to expedite proceedings on pipeline crossing disputes. By Julian Hast Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Baltimore bridge collapse to raise retail fuel prices


27/03/24
News
27/03/24

Baltimore bridge collapse to raise retail fuel prices

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Louisiana pipeline crossing bill nears senate vote


27/03/24
News
27/03/24

Louisiana pipeline crossing bill nears senate vote

New York, 27 March (Argus) — The Louisiana state senate is scheduled to vote tonight on a bill seeking to clarify pipeline servitude rights and expedite pipeline crossing disputes, advancing legislation promoted by three natural gas pipeline companies involved in a legal battle with US midstream giant Energy Transfer. Natural gas transmission projects by Williams, Momentum Midstream and DT Midstream — which aim to connect growing production out of the prolific Haynesville shale to a wave of new LNG export terminals along the US Gulf coast — have been put on hold while legal proceedings between Energy Transfer and DT Midstream play out. All three companies' proposed pipelines would cross Energy Transfer's own Tiger pipeline in northern Louisiana. The three pipeline companies' projects propose an excessive number of crossings over the Tiger line, an attorney for Energy Transfer argued in a Louisiana senate committee last week, and Energy Transfer has the servitude rights to stop them. But Energy Transfer's "unique" interpretation of the civil code on pipeline crossings is hurting the economy of Louisiana, the author of the bill , Louisiana senator Alan Seabaugh (R), said last week. By blocking the construction of new pipelines out of the Haynesville, Energy Transfer is eliminating jobs and taxes that would be created by new infrastructure, he said. Moreover, by arguing its servitude rights extend above and below its existing pipeline "to the center of the earth," Energy Transfer is "asserting a right that nobody has ever asserted before," Seabaugh said. The Seabaugh bill clarifies that, unless explicitly stated otherwise in a contract, pipeline servitude rights extend only to the physical space occupied by the pipeline and any space necessary to maintain it. The contract stipulating Energy Transfer's servitude rights for the Tiger pipeline is silent on the subject of that vertical, underground space, according to bill supporters. "This really isn't about pipeline crossings — this is about controlling market share," said Jimmy Faircloth, attorney for Momentum Midstream. But the pipeline industry has been amicably working together for decades to allow for reciprocal crossings, Energy Transfer attorney Kay Medlin said. By ripping up this convention over a dispute involving so many crossings, and forcing an expedited legal proceeding for something which "is not a minor process," the Seabaugh bill threatens an industry "that ain't broke," she said. "This legislation will break it, and you will likely spend years trying to fix it, if you ever can," Medlin said. The Seabaugh bill is a companion to two bills which passed 100-0 and 99-0, respectively, in the Louisiana House of Representatives on 21 March. Those bills seek to clarify the law on pipeline crossings and to expedite proceedings on pipeline crossing disputes. By Julian Hast Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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US breaks $79/bl ceiling in latest SPR purchase


27/03/24
News
27/03/24

US breaks $79/bl ceiling in latest SPR purchase

Washington, 27 March (Argus) — President Joe Biden's administration has exceeded a price ceiling that has guided when the US government would buy crude to refill the US Strategic Petroleum Reserve (SPR), with the latest crude purchase hitting a price of $81.32/bl. The US Department of Energy (DOE) six months ago adopted a new strategy for replenishing the SPR, with a plan to use consistent monthly purchases to replace some of the 180mn bl of crude that Biden sold from the reserve in 2022 after the start of the Russia-Ukraine conflict. For months, DOE has said it would continue to buy crude so long as it was a "good deal for taxpayers," which the agency defined as a purchase price not to exceed $79/bl. But the agency's latest crude purchase, for nearly 2.8mn bl of sour crude for delivery in September, came at a cost of $225.6mn, an average price of $81.34/bl, according to data DOE recently published on its website. The crude contracts went to Macquarie Commodities Trading, Sunoco Partners Marketing & Terminals and Total's Atlantic Trading & Marketing. DOE, asked for comment about why it purchased crude in excess of its price target, said there would "likely be news coming later today." Before this week, the administration had largely adhered to its $79/bl price target to buy 24.7mn bl of crude for delivery to the SPR from January through August, with the exception of a $79.10/bl purchase for January delivery. DOE reiterated the price ceiling on 14 March, when it announced a new solicitation to buy crude, and last year had called off multiple crude solicitations when prices came in too high. DOE has previously increased its price ceiling based on shifts in the oil market. DOE in 2022 had initially targeted a purchase price of $67-$72/bl, resulting in the purchase of 6.3mn bl of crude last summer at an average price of $72.67/bl. But after rising prices put that target out of reach, DOE raised its price ceiling to $79/bl. The SPR held 363mn bl of crude as of 22 March, according to federal data. By the end of this year, as a result of crude purchases, the reserve is expected to "be back to essentially where we would have been had we not sold during the invasion of Ukraine," US energy secretary Jennifer Granholm said on 20 March, after accounting for the cancellation of 140mn bl of congressional mandated crude sales that were scheduled through 2031. With the latest crude purchase, DOE will have signed contracts to buy 32.4mn bl of crude at an average price of nearly $77/bl, of which more than 19mn bl has yet to be delivered to the SPR. Another 20mn bl of crude that oil companies and traders borrowed from the SPR in 2022 is set to be returned by year-end, which would push inventories in the reserve to above 400mn bl. By Chris Knight Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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South Sudan crude output halves on pipeline blockage


27/03/24
News
27/03/24

South Sudan crude output halves on pipeline blockage

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