• 3 minutes Could Venezuela become a net oil importer?
  • 7 minutes Reuters: OPEC Ministers Agree In Principle On 1 Million Barrels Per Day Nominal Output Increase
  • 12 minutes Battle for Oil Port: East Libya Forces In Full Control At Ras Lanuf
  • 16 mins Oil prices going Up? NO!
  • 1 day Could Venezuela become a net oil importer?
  • 4 hours Reuters: OPEC Ministers Agree In Principle On 1 Million Barrels Per Day Nominal Output Increase
  • 1 day Tesla Closing a Dozen Solar Facilities in Nine States
  • 1 hour Could oil demand collapse rapidly? Yup, sure could.
  • 1 day Gazprom Exports to EU Hit Record
  • 1 day EU Leaders Set To Prolong Russia Sanctions Again
  • 16 mins Renewables to generate 50% of worldwide electricity by 2050 (BNEF report)
  • 2 hours Oil prices going down
  • 1 day Why is permian oil "locked in" when refineries abound?
  • 1 day Oil Buyers Club
  • 23 mins Battle for Oil Port: East Libya Forces In Full Control At Ras Lanuf
  • 8 mins Saudi Arabia turns to solar
  • 16 hours Russia's Energy Minister says Oil Prices Balanced at $75, so Wants to Increase OPEC + Russia Oil by 1.5 mbpd
  • 1 day EVs Could Help Coal Demand
  • 1 day China’s Plastic Waste Ban Will Leave 111 Million Tons of Trash With Nowhere To Go
Alt Text

Permian Boom Jeopardized By Pipeline Troubles

Once a magnet for investors,…

Alt Text

OPEC’s Agreement Sends Oil Prices Soaring

Oil prices spiked on Friday…

Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

More Info

Trending Discussions

Trump’s First Step To Boost Gulf Of Mexico Drilling

offshore rig

Small but potentially very important item for oil and gas explorers this past week. With the U.S. government making drilling much more attractive in one of the world’s go-to petroleum destinations.

The Gulf of Mexico.

The US Bureau of Ocean Energy Management (BOEM) announced last week it is lowering royalties on oil and gas production in the shallow water Gulf of Mexico. With rates set to drop to 12.5 percent, from a current 18.75 percent.

The revised rates will apply to wells drilled in less than 200 meters water depth. With deeper-water wells continuing to command the 18.75 percent royalty.

Changes in royalties will apply to all new wells in shallow water going forward — but will not be applied retroactively to existing projects.

BOEM noted that “hydrocarbon price conditions and the marginal nature of remaining [Gulf] shelf resources suggest a royalty rate reduction is an appropriate and timely action.” Which makes sense, given the agency saw bids on shallow water acreage last year fall by more than 90 percent as compared to 2014.

The government is thus trying to bring drillers back to the shallow Gulf by offering better fiscal terms.

Of course, one of the biggest drivers here is President Trump’s “energy dominance” platform. Which he has been pushing to agencies across the U.S., in a drive to streamline and promote new drilling for oil and gas.

This week’s move is almost certainly an offshoot of that presidential pressure. And thus may represent the first big investment opportunity to come down in natural resources because of Trump’s election. Related: Will Oil Inventories Continue To Fall Over The Summer?

For E&Ps, the lower royalties could indeed create opportunities. With overall government take in the Gulf of Mexico already having some of the lowest rates globally.

Drillers here were having good success prior to the collapse in oil prices. With the shallow water region even seeing a boom in private equity investment, pouring billions into projects here.

This week’s royalty change could bring back some of that investment excitement. Watch for the industry response during upcoming Gulf of Mexico bid rounds — with the next round scheduled for August 16.

Here’s to necessary changes.

By Dave Forest

More Top Reads From Oilprice.com:




Back to homepage

Trending Discussions


Leave a comment
  • Bill Simpson on July 10 2017 said:
    It would have been a big deal 50 years ago.
  • MontanaOsprey on July 10 2017 said:
    They need to bring down the new deepwater royalty rates to 8.00% or less. It's a lot, lot more expensive (try $5 Bil) for something like deep water exploration and the related Thunder-horse drilling and production platform, a hundred fifty miles or more from shore!

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News