NEW YORK (Reuters) – The U.S. Bureau of Safety and Environment Enforcement, which overseas offshore oil and gas production, said it will consider lower royalty payments for producers that invest in projects to enable existing platforms to reach their full capacity.
The move to offer royalty relief comes in the final months of the Trump administration, and follows similar policy changes in shallow water drilling last year.
BSEE found that four in every five deepwater facilities is producing at less than half of its nameplate capacity, agency director Scott Angelle told Reuters on Thursday. The Gulf of Mexico has 68 deepwater offshore facilities, of which 38 produce at less than 25% of their full capacity, he said.
BSEE’s sister agency, the Bureau of Ocean Energy Management, found that current royalty structures make it cost prohibitive for offshore oil producers to create particularly long extensions that feed oil back to an existing platform, Angelle said. While so-called tiebacks to platforms are common, tiebacks that exceed about 30 miles (48 km) require cost-prohibitive subsea flow assurance technology.
“We want to make sure America doesn’t have stranded assets,” he said, referring to producing oil from federal waters. “Reducing the royalty rate to pay for the incremental cost of the subsea flow assurance means that more projects may be economic,” he said.
He said he did not know whether the incoming Joe Biden administration could change the policy.
“I don’t have any preconceived idea that what we’re doing here is going to live forever,” he said. “But it would appear to me that regardless of who is in power, the facts are very clear: the American people need to get the value of their resources.
“Protecting the interests of the American public is our responsibility, as BOEM estimates 4.5 billion barrels of oil equivalent are in proximity to these deepwater facilities.”
Other recent pushes to expand oil and gas drilling have included the Administration’s efforts last month to offer oil drilling leases in the Arctic National Wildlife Refuge in Alaska, overseen by the Bureau of Land Management.
(Reporting by Jessica Resnick-Ault; Editing by Stephen Coates)
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