Spurred by Incentives

Spurred by Incentives, Oil and Gas Production in the Gulf of Mexico Expected to Increase Over the Next Decade

November 15, 2004

Release: #3199

The Newsroom, Minerals Management Service (MMS)

New incentives to encourage energy companies to explore and develop difficult-to-reach areas of the Gulf of Mexico will help boost peak oil production in the gulf by 43 percent and natural gas production by 13 percent over the next decade, Assistant Secretary of the Interior for Land and Minerals Management Rebecca Watson announced today.

“Energy companies are responding positively to new incentives offered under the President’s Energy Plan that allow them to tap into pockets of oil and gas in areas of the gulf that otherwise would not be economical to produce,” Watson said at a news conference where she released the Minerals Management Service’s first-ever 10-year energy projections for the gulf. “For American consumers, this will mean less dependence on unstable sources of imported energy.”

Oil production in the Gulf will increase to a record 2 million barrels per day by 2006, compared to the current rate of 1.5 million barrels per day, and could reach 2.25 million barrels a day by 2011, according to MMS projections. The projected increase in oil production will provide enough additional energy to heat 3.5 million new homes.

Since 2001, the administration has continued incentive programs for deep-water areas of the gulf and introduced new incentives for other areas. The most recent incentives announced by Interior Secretary Gale Norton in January, offer developers royalty relief to tap into pockets of natural gas deep under shallow waters in the gulf that otherwise would be too costly and financially risky to attempt.

“The Gulf of Mexico delivers more oil and gas to the U.S. market than any single domestic or foreign source, but many older, easier-to-reach fields have passed their peak. Exploration has shown more gas can be produced at deeper depths under existing shallow water infrastructure; and oil can be produced at tremendous depths -- many miles beneath the gulf’s surface,” Watson said. “To help ensure our future energy security, we need to reward developers for the huge risks they take when they explore in deep-water and deep-shelf areas.”

“A rise in deep water oil production is fueling this dramatic increase, and almost 80 percent of Gulf oil production in 2011 is expected to come from this resource rich region,” Watson said. “We expect our greatest oil production to come from the deep water region of the Gulf; while in the case of natural gas, both the deep-water and the shallow-water deep shelf hold the most promise.”

MMS Gulf of Mexico Regional Director, Chris Oynes said, “We are now in the ninth year of sustained expansion of the deep water frontier in the Gulf of Mexico. It appears likely that it will expand greatly over the next 10 years as more than 100 development projects have begun production and new discoveries that have occurred in the last three years will likely be developed.”

The MMS long-range projection of deep-water projects that industry has indicated they intend to pursue shows oil production in that region will drive the increase in the coming years. After these projects reach their production peaks, MMS believes that the anticipated 2 million barrels of oil per day level can be maintained if operators commit to developing existing discoveries and continue to explore the deep water frontier. In 2003, operators announced 13 discoveries in deep water and have announced another 10 so far this year.

Gas production in the Gulf is expected to show some decline in the short-term as old fields begin to be exhausted and then to show an increase again as new wells in deep-shelf and deep-water areas come into production. Projections show that natural gas production will rebound beginning in 2008 and will reach more than 13 billion cubic feet per day in 2011.

Gulf of Mexico natural gas production is slightly more than 12 billion cubic feet per day. The Minerals Management Service forecasts that total Gulf natural gas production levels will decrease slightly by 2007 to just over 11 billion cubic feet per day. However, MMS projections show that natural gas production will rebound beginning in 2008 and will reach more than 13 billion cubic feet per day in 2011.

This year’s production estimate by MMS is based on a new methodology. In addition to surveying oil and gas companies, MMS analyzed recent deepwater discoveries and projected deepwater reserves. This method enabled MMS to forecast Gulf production 10 years into the future instead of the previous standard five-year projection.

“Our quality of life and economic security is dependant on a stable and abundant supply of affordable energy,” Watson said. “By carefully integrating energy and environmental policy we can encourage the production and development of energy sources offshore and on our public lands to help meet those needs while protecting the environment.”

The 10-year production forecast is available in the new MMS publication, Gulf of Mexico Oil and Gas Production Forecast: 2004-2013 (MMS OCS Report 2004-065): http://www.mms.gov/Assets/PressConference11152004/2004-065.pdf (34 pages)

Additional information regarding deep-water exploration and development can be obtained at: http://www.gomr.mms.gov/homepg/offshore/deepwtr.html

See the bullets below for additional information.

The Minerals Management Service is the federal agency in the U.S. Department of the Interior that manages the nation’s oil, natural gas, and other mineral resources on the Outer Continental Shelf in Federal offshore waters. The agency also collects, accounts for, and disburses mineral revenues from Federal and American Indian lands. MMS disbursed more than $8 billion in FY 2003 and more than $143 billion since the agency was created in 1982. Nearly $1 billion from those revenues go into the Land and Water Conservation Fund annually for the acquisition and development of state and Federal park and recreation lands.

Gulf of Mexico Gas Rates (Billion Cubic Feet/Day) http://www.mms.gov/ooc/press/2004/press1115GOM_Gas_Rates.htm

Gulf of Mexico Oil Rates (Thousand Barrels/Day) http://www.mms.gov/ooc/press/2004/press1115GOM_Oil_Rates.htm

PowerPoint Presentation/Photo Gallery Page of Graphics http://www.mms.gov/PhotoGalleryPages/NewsConference11152004.htm

Gulf of Mexico Oil and Gas Production Forecast: 2004-2013 (PDF, 887 KB) http://www.mms.gov/Assets/PressConference11152004/2004-065.pdf

Monument Graphic (JPG, 327 KB) http://www.mms.gov/Assets/PressConference11152004/MonumentGraphic_100604_7pm.jpg

Deepwater: Where the Energy Is (Brochure, PDF, 663 KB) http://www.mms.gov/Assets/PressConference11152004/MSGlossySingle_110404.pdf

Relevant Web Sites:

MMS Main Website: http://www.mms.gov

Gulf of Mexico Website http://www.gomr.mms.gov

Contacts:

Rebecca Watson*, Assistant Secretary of Land & Minerals Management Department of the Interior: rebecca_watson@ios.doi.gov or 202-208-6734; Fax: 202-208-3619

Chris Oynes, MMS Gulf of Mexico Regional Director: chris.oynes@mms.gov or 504-736-2589; Fax: 504-736-2342

Curtis Carey curtis.carey@mms.gov or 202-208-3983

MMS: Securing Ocean Energy & Economic Value for America http://www.mms.gov

U.S. Department of the Interior

http://www.mms.gov/ooc/press/2004/press1115.htm

Other relevant, researched and very interesting information:

*Rebecca Watson - Rebecca Wunder Watson was confirmed on January 25, 2002. Before joining the Department of the Interior, Watson worked at the law firm Gough, Shanahan, Johnson, & Waterman. She served as assistant general counsel for energy policy at the Department of Energy during the administration of President George H.W. Bush. A graduate of the University of Denver and the University of Denver College of Law, Assistant Secretary Watson has served on the Public Lands Committee, American Bar Association, and the Rocky Mountain Mineral Law Foundation.

Job Description:

The assistant secretary oversees three federal agencies: the Bureau of Land Management, the Minerals Management Service, and the Office of Surface Mining Reclamation and Enforcement. These agencies cover such wide-ranging topics as recreational use of public lands, grazing rights, and offshore mineral excavation.

Type of appointment: Presidential with Senate confirmation

Approximate salary: $134,000

http://www.progressivegovernment.org/appointee_data4.php?title=Assistant%20Secretary,%20

Land%20and%20Minerals%20Management%20-%20IN

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Current Deepwater Activity (updated weekly): http://www.gomr.mms.gov/homepg/offshore/deepwatr/Current_Deepwater_Activity.pdf

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Sustainable Oil?

May 25, 2004

By Chris Bennett

http://www.WorldNetDaily.com

To submit a Letter to the Editor: letters@worldnetdaily.com

About 80 miles off the coast of Louisiana lies a mostly submerged mountain, the top of which is known as Eugene Island. The portion underwater is an eerie-looking, sloping tower jutting up from the depths of the Gulf of Mexico, with deep fissures and perpendicular faults that spontaneously spew natural gas.

A significant reservoir of crude oil was discovered nearby in the late '60s, and by 1970 a platform named Eugene 330 was busily producing about 15,000 barrels a day of high-quality crude oil.

By the late '80s, the platform's production had slipped to less than 4,000 barrels per day, and was considered pumped out. Done.

Suddenly, in 1990, production soared back to 15,000 barrels a day, and the reserves -- which had been estimated at 60 million barrels in the '70s -- were recalculated at 400 million barrels.

Interestingly, the measured geological age of the new oil was quantifiably different than the oil pumped in the '70s.

Analysis of seismic recordings revealed the presence of a "deep fault" at the base of the Eugene Island reservoir, which was gushing up a river of oil from some deeper and previously unknown source.

Similar results were seen at other Gulf of Mexico oil wells.

Similar results were found in the Cook Inlet oil fields in Alaska.

Similar results were found in oil fields in Uzbekistan. Similarly in the Middle East, where oil exploration and extraction have been underway for at least the last 20 years, known reserves have doubled.

Currently there are somewhere in the neighborhood of 680 billion barrels of Middle East reserve oil.

Creating that much oil would take a big pile of dead dinosaurs and fermenting prehistoric plants.

Could there be another source for crude oil?

An intriguing theory now permeating oil company research staffs suggests that crude oil may actually be a natural inorganic product, not a stepchild of unfathomable time and organic degradation.

The theory suggests there may be huge, yet-to-be-discovered reserves of oil at depths that dwarf current
world estimates.

The theory is simple: Crude oil forms as a natural inorganic process that occurs between the mantle and the crust, somewhere between 5 and 20 miles deep. The proposed mechanism is as follows:

Methane (CH4) is a common molecule found in quantity throughout our solar system -- huge concentrations exist at great depth in the Earth.

At the mantle-crust interface, roughly 20,000 feet beneath the surface, rapidly rising streams of compressed methane-based gasses hit pockets of high temperature causing the condensation of heavier hydrocarbons. The product of this condensation is commonly known as crude oil.

Some compressed methane-based gasses migrate into pockets and reservoirs we extract as "natural gas."

In the geologically "cooler," more tectonically stable regions around the globe, the crude oil pools into reservoirs.

In the "hotter," more volcanic and tectonically active areas, the oil and natural gas continue to condense and eventually to oxidize, producing carbon dioxide and steam, which exits from active volcanoes.

Periodically, depending on variations of geology and Earth movement, oil seeps to the surface in quantity, creating the vast oil-sand deposits of Canada and Venezuela, or the continual seeps found beneath the Gulf of Mexico and Uzbekistan.

Periodically, depending on variations of geology, the vast, deep pools of oil break free and replenish existing known reserves of oil.

There are a number of observations across the oil-producing regions of the globe that support this theory. The list of proponents begins with Mendelev (who created the periodic table of elements) and includes Dr. Thomas Gold (founding director of Cornell University Center for Radiophysics and Space Research) and Dr. J.F. Kenney of Gas Resources Corporations, Houston, Texas.

In his 1999 book, "The Deep Hot Biosphere," Dr. Gold presents compelling evidence for inorganic oil formation. He notes that geologic structures where oil is found all correspond to "deep earth" formations, not the haphazard depositions we find with sedimentary rock, associated fossils or even current surface life.

He also notes that oil extracted from varying depths from the same oil field have the same chemistry -- oil chemistry does not vary as fossils vary with increasing depth. Also interesting is the fact that oil is found in huge quantities among geographic formations where assays of prehistoric life are not sufficient to produce the existing reservoirs of oil. Where then did it come from?

Another interesting fact is that every oil field throughout the world has outgassing helium. Helium is so often present in oil fields that helium detectors are used as oil-prospecting tools. Helium is an inert gas known to be a fundamental product of the radiological decay or uranium and thorium, identified in quantity at great depths below the surface of the earth, 200 and more miles below. It is not found in meaningful quantities in areas that are not producing methane, oil or natural gas. It is not a member of the dozen or so common elements associated with life. It is found throughout the solar system as a thoroughly inorganic product.

Even more intriguing is evidence that several oil reservoirs around the globe are refilling themselves, such as the Eugene Island reservoir -- not from the sides, as would be expected from concurrent organic reservoirs, but from the bottom up.

Dr. Gold strongly believes that oil is a "renewable, primordial soup continually manufactured by the Earth under ultra-hot conditions and tremendous pressures. As this substance migrates toward the surface, it is attached by bacteria, making it appear to have an organic origin dating back to the dinosaurs."

Smaller oil companies and innovative teams are using this theory to justify deep oil drilling in Alaska and the Gulf of Mexico, among other locations, with some success. Dr. Kenney is on record predicting that parts of Siberia contain a deep reservoir of oil equal to or exceeding that already discovered in the Middle East.

Could this be true?

In August 2002, in the "Proceedings of the National Academy of Sciences (US)," Dr. Kenney published a paper, which had a partial title of "The genesis of hydrocarbons and the origin of petroleum."

http://www.pnas.org/cgi/content/full/99/17/10976?maxtoshow=&HITS=10&hits=10&RESULTFORMAT

=&fulltext=genesis+of+hydrocarbons+and+the+origin+of+petroleum&searchid=1085470440708_510

&stored_search=&FIRSTINDEX=0

Dr. Kenney and three Russian coauthors conclude:

The Hydrogen-Carbon system does not spontaneously evolve hydrocarbons at pressures less than 30 Kbar, even in the most favorable environment. The H-C system evolves hydrocarbons under pressures found in the mantle of the Earth and at temperatures consistent with that environment.

He was quoted, "Competent physicists, chemists, chemical engineers and men knowledgeable of thermodynamics have known that natural petroleum does not evolve from biological materials since the last quarter of the 19th century."

Deeply entrenched in our culture is the belief that at some point in the relatively near future we will see the last working pump on the last functioning oil well screech and rattle, and that will be that: The end of the Age of Oil. And unless we find another source of cheap energy, the world will rapidly become a much darker and dangerous place.

If Dr. Gold and Dr. Kenney are correct, this "the end of the world as we know it" scenario simply won't happen. Think about it ... while not inexhaustible, deep Earth reserves of inorganic crude oil and commercially feasible extraction would provide the world with generations of low-cost fuel.

Dr. Gold has been quoted saying that current worldwide reserves of crude oil could be off by a factor of over 100.

A Hedberg Conference, sponsored by the American Association of Petroleum Geologists, was scheduled to discuss and publicly debate this issue. Papers were solicited from interested academics and professionals.

The conference was scheduled to begin June 9, 2003, but was canceled at the last minute.

A new date has yet to be set.

Related links:

Gas Origin Theories To Be Studied

http://www.aapg.org/explorer/2002/11nov/abiogenic.cfm

The Mystery Of Eugene Island 330

http://www.science-frontiers.com/sf124/sf124p10.htm

Odd Reservoir Off Louisiana Prods Oil Experts To Seek A Deeper Meaning

http://www.oralchelation.com/faq/wsj4.htm

Fuel's Paradise

http://www.wired.com/wired/archive/8.07/gold_pr.html

-----

Chris Bennett manages an environmental engineering division for a West Coast technology firm. He and his wife of 26 years make their home on the San Francisco Bay .

http://www.worldnetdaily.com/news/article.asp?ARTICLE_ID=38645

http://www.propertyrightsresearch.org/2004/articles8/sustainable_oil.htm