Deepwater Gulf of Mexico 2004: America's Expanding ... - OCS BBS

LEASE OWNERSHIP
A handful of major oil and gas companies blazed the trail into deepwater in the 1980’s and early 1990’s.
In this report, we define major companies to include BP, ChevronTexaco, ExxonMobil, and Shell.
Appendix E shows the companies and subsidiaries that form these majors. (Grouping of these four
entities does not indicate a regulatory conclusion or an analysis of production size. It is merely a
convenient category for the purpose of comparison.) Figure 27 illustrates the relative leaseholding
positions of majors versus nonmajors. (Figure 27 reflects the most recent lease ownerships at the end of
each 2-year period.) Note that majors dominated deepwater leasing in 1992-1993. In 1996, nonmajors
began acquiring significant leaseholdings, a trend that continued through 2003. Nonmajor companies are
poised to play a leading role in the future of the deepwater Gulf.
The type of companies active in deepwater clearly changed with the increased presence of nonmajor oil
and gas companies. Another change in deepwater lease ownership came with the wave of company
mega-mergers. The industry mergers increased the diversity of leaseholdings for the merged companies.
For example, while some companies were heavily focused on the deepwater GOM prior to the mergers,
their merger partners may have been focused primarily on shallow-water prospects. The combination of
these entities yielded a larger leasehold position in all water depths and frequently a broader geographic
range across the GOM.
FUTURE LEASE ACTIVITY
Since the deepwater arena is already heavily leased, the number of leases that are relinquished or expire
will influence activity in future lease sales. Given the fact that most companies can only drill a small
percentage of their active leases, it is likely that many high-quality leases will expire without being tested.
The impending turnover of these leases often results in “farm-outs” to nonmajors, opportunities for
different companies to gain a lease position and, potentially, a more rapid exploration and development of
the acreage. Ultimately, an untested and undeveloped lease will expire and possibly be leased again.
Figure 28 shows leases that will expire in the coming years, assuming each lease expires at the end of its
primary lease term (without a lease-term extension). Note that lease terms vary according to water depth.
Primary lease terms are five years for blocks in less than 400 m (1,312 ft), eight years for blocks in
400-799 m (1,312-2,622 ft), and ten years for blocks in 800 m (2,625 ft) or greater. Therefore, in the
absence of primary lease-term extensions, all active shallow-water leases will expire before 2010
(explaining the absence of expiring shallow-water leases in certain frames of figure 28). The 2003 and
2004 lease sales will offer a limited number of expired deepwater leases because of moderate leasing
activity in 1993 and 1994. The availability of previously leased blocks is expected to increase
dramatically in 2006 as a result of the leasing boom that began in 1996 and continued through 1998. The
lease expiration projections will pressure leaseholders to drill and evaluate their holdings and will provide
opportunities for other companies to enter an active play by acquiring leases as they expire or by
obtaining “farm-outs” from companies with untested acreage.
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