Reduced Royalty Rates Will Lead to Even Greater Increase in GOM Activity



Reduced Royalty Rates Will Lead to Even Greater Increase in GOM Activity
Reduced royalty rates will lead to an even greater increase in activity in the Gulf of Mexico, according to the Louisiana Mid-Continent Oil and Gas Association President Chris John.

Reduced royalty rates will lead to an even greater increase in activity in the Gulf of Mexico, according to the Louisiana Mid-Continent Oil and Gas Association (LMOGA) President Chris John.

“Royalty rates onshore and shallow water are 12.5 percent, however, the deepwater remains at 18.75 percent,” John said in an organization statement. 

“The cost of drilling, exploring and producing is much higher in the deepwater and we have a tremendous opportunity to provide a level playing field when it comes to royalty rates and the competitiveness of the Gulf,” he added.

“Ultimately, reduced royalty rates will lead to an even greater increase in activity in the Gulf of Mexico, an increase in production, and an increase in much needed oil and gas industry jobs and will fully support the Administration’s American energy dominance,” John continued.

The latest Gulf of Mexico lease sale generated $178 million in high bids for 144 tracts covering 801,288 acres. A total of 29 companies participated in the sale.

Commenting on the results of the latest round, William Turner, senior research analyst at Wood Mackenzie, said “expectations were muted going into this lease sale”.

"However, with an increase in competitive bids and dollar amount from the last round, companies demonstrated their continued confidence in the region. Increased competition centring around more selective blocks close to infrastructure tells us that capital is returning to the Gulf of Mexico,” Turner added.

The Wood Mackenzie representative said the biggest surprise in the round came from Hess.

"It bid $25.9 million on a block in the heart of the Mississippi Canyon near BP's Na Kika offshore platform. Surprising as it is also near the Silvergate prospect, a dry hole,” Turner stated.

"Meanwhile, Equinor and Exxon, among others, demonstrated an increased appetite for risk with bids on remote blocks," he added.

"This reflects the steady increase in oil price and competitive ROI now due to much more efficient practices in the Gulf of Mexico,” Turner continued.

LMOGA, founded in 1923, is a trade association exclusively representing all sectors of the oil and gas industry operating in Louisiana and the Gulf of Mexico.



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