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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: Tommaso who wrote (24040)	6/21/2003 9:28:25 AM
From: John Carragher	Respond to of 206223

Cos Praise US Royalty Relief For Gulf Gas; Suggest More Friday June 20, 4:57 pm ET By Roy R. Reynolds, Of DOW JONES NEWSWIRES HOUSTON -(Dow Jones)- Energy companies issued laudatory comments recently for the initial version of a U.S. Interior Department plan to spur drilling on offshore natural gas, a sign there may be few changes in the final version of the rule. ADVERTISEMENT The Interior Department's Minerals Management Service has proposed relief in royalties for deep natural gas drilling on shallow-water leases, a move that has unanimous support from the companies it affects. "The comments from the industry have pretty much been in favor of the proposed rule," MMS spokesman Barney Congdon said in a phone interview Thursday. "They seem to like the way the rule looked." But many simply think the relief doesn't go far enough to truly incite short- term gas production, something the government wants to help ease supply issues and high prices. The MMS suggests cutting royalties for gas wells of 15,000 feet or more for production that commences within five years of the rule in order to spur short- term production. The first 15 billion cubic feet of gas pulled from 15,000 to 18,000-foot wells and the first 25 bcf of gas pulled from wells deeper than 18,000 feet would be exempt from royalties normally paid to the federal government. Many of the first public comments about the rule, posted on the MMS Web site, suggest that 10 years might be a better span for the suspension of royalties. "Given the formidable technical obstacles presented by the drilling and development of deep gas, it is unlikely that production could be started prior to the expiration of the five-year maximum lease term currently provided for ( Gulf of Mexico) shelf leases," Sue Payne, area manager for U.S. and Mexico for ExxonMobil wrote to the MMS. Royalty relief is designed to increase production by taking away some of the financial risk involved. According to the Interior Department, about a quarter of domestic gas production comes from federal waters in the Gulf of Mexico. A projected 30% gain in natural gas demand over the next 10 years - a figure from the National Petroleum Council cited in the new royalty plan - could keep raising already- high gas prices. The MMS has suspended royalties in the past for some deepwater drilling, but the current proposal targets strictly shelf drilling, in water under 200 feet deep. In the recent Lease Sale 185, 44% of the bids were directed toward shallow water properties in the Gulf of Mexico. The MMS published the proposed rule in March, and accepted public comments until May 27. The agency started publishing those comments this week. The positive slant of most comments may stem off any major changes in the final version of the proposal. "Generally, (the relief) is at a level we feel will provide genuine incentive, " said Edward Porter, a research manager at the American Petroleum Institute (News - Websites) in a phone interview Friday. "It's something we're really happy with." Congdon said there wasn't definitive timeline on the final draft of the rule, the next step in the process. Drafters of the proposal took note of both written comments and those made at a public meeting in Houston on the matter. "They'll absorb all of that to craft the revised rule," Congdon said. But the final version, he said, is likely to be very close to the initial draft. A number of energy companies writing to the MMS suggested lengthening the term of the rule, and quite a few also wanted the inclusion of sidetrack drilling - a new lateral section branching out from an older well. "Sidetracks are the most significant thing we'd like to see added to the plan, " Porter said. "We're talking about shallow water, and there's already a tremendous amount of infrastructure there." Using existing platforms would be consistent with the MMS mission of boosting gas production in a short time frame, he said. "It's kind of in the spirit of what they're doing here," Porter said. Nearly all of the energy companies who sent in comments on the proposal praised the basic construct of the effort. "Marathon wholeheartedly supports the general concepts underlying the proposed rule," wrote M.J. Koenig, manager of U.S. Land for Marathon Oil Co. (NYSE:MRO - News) . "MMS is to be commended for their efforts in drafting this proposed rule." Peter Velez, manager of regulatory affairs and incident command for Royal Dutch/Shell Group's Shell Exploration and Production Co., wrote that sidetracks would allow for even more gas production on the shelf. "Many of the mature platform infrastructure located on the shelf that would be utilized for deep gas development are already slot limited," he wrote. "The only opportunity to utilize the current infrastructure would be sidetrack opportunities. "To do otherwise would require major structural modifications to platforms." -By Roy R. Reynolds; Dow Jones Newswires; 713-547-9208; roy.reynolds@dowjones.com