Platts Energy Podium: U.S. BOEM Director Defends New Terms for Offshore Oil, Gas Sales

WASHINGTON, Nov. 15, 2011 /PRNewswire/ -- The proposed five-year plan for offshore oil and gas leasing strikes the right balance between encouraging industry to buy only the sections they intend to explore and ensuring that vast resource-rich areas are made available for development, Tommy Beaudreau, the director of the U.S. Bureau of Ocean Energy Management (BOEM), said Tuesday.

Speaking at a Platts Energy Podium event in Washington, Beaudreau said changes in the proposed lease terms are intended to speed production. He also said that areas such as the Atlantic coast, which are not included in the plan, are still on the table for future sales.

The proposed 2012-2017 plan nearly triples the minimum bid for future sales in deepwater from $37.50 per acre (/acre) to $100/acre. The decision, Beaudreau said, was based on an internal study that showed that the industry rarely, if ever, spudded wells on parcels bought for less than $100/acre.

"Companies had simply – because it was cheap, so why not do it – bought and inventoried that acreage and did nothing with it," Beaudreau said. "As part of a pro-development mindset and bent, we increased the minimum bid so industry would focus on acreage that they believe, as reflected by their economic analysis underlying their bidding decisions, has real potential for bringing production online and making discoveries."

Beaudreau rejected arguments made earlier in the day by Erik Milito, upstream director for the American Petroleum Institute, that the change in lease terms would result in lower bids and less exploration on marginal tracts.

Beaudreau said industry will have sufficient incentive to take risks in areas where seismic data shows new potential.

"It's frankly not borne out in the data," Beaudreau said of the criticism of the decision to alter lease terms. "Our decision making is grounded on the data first. Our analysis shows that, with respect to a lot of these areas that were under lease but simply not being worked, that there wasn't any exploration going on, that they've been simply bought too cheap and warehoused."

Beaudreau also rejected criticism from industry and some Republican legislators that the five-year plan is too restrictive and overemphasizes leases in the Gulf of Mexico, where there already is ample exploration ongoing.

"The fact of the matter is there is a lot of new potential in the Gulf of Mexico," he said.

Beaudreau said a programmatic environmental impact statement on the effects of seismic studies in the mid-Atlantic should be ready for public comment by next summer. He said the administration's goal is to move deliberately toward leases with companies to study the area's energy potential.

"I don't know how much more clear our messaging on this could be. We want seismic evaluation to go forward in order to develop information about the resource potential in the area. I know industry wants that. We certainly want it," he said.

A recording of the Beaudreau session is available via podcast at this link:

http://platts.com/PodcastsDetail/EnergyPodium/energypodium.  

Sponsored by Platts, a leading global energy, petrochemicals and metals information provider, Platts Energy Podium provides an ongoing forum for prominent newsmakers and the press to address important energy and environmental issues.

Members of the media may receive invitations for Energy Podium events by contacting Kathleen Tanzy at 212-904-2860.

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