MMS Incentives for Some Gulf Fields Off Since Storm
HOUSTON Jan 31, 2006 (Dow Jones Commodities News via Comtex)
Seeking to reduce the recent hurricanes' permanent impact on Gulf of Mexico oil and gas production, the U.S. Minerals Management Service plans to offer financial incentives for projects that would otherwise be unprofitable.
Analysts and officials have estimated that between 1% and 2% of the Gulf's oil and gas production capacity may have been lost for good due to hurricanes Rita and Katrina. The storms destroyed dozens of mostly-older platforms with reservoirs too small to justify reinvestment.
The MMS will suspend royalties "when it is determined that royalty relief is needed for production to resume," the agency said in a notice last week. Applications will be accepted starting Feb. 1.
During a conference call with analysts last week, Chevron Corp. (CVX) estimated its permanent loss of Gulf production to range between 10,000 and 20,000 barrels a day.
Chevron lost several small platforms, as well as a large deepwater facility, the tension leg platform Typhoon, which had a capacity of 40,000 barrels a day and 60 million cubic feet of gas a day. A Chevron executive said in October that the company would seek to restore production from the Typhoon field.
The hurricanes destroyed 115 platforms and damaged 52 others, out of a total of 4,000, the MMS said in a recent report. About 183 pipelines were damaged as well, the agency said.
Approximately 373,407 barrels of oil a day, or 24.9% of daily oil production, and 1.66 billion cubic feet per day of natural gas production, or 16.6% of daily output, remained off-line as of Jan. 25, the MMS said.
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