The Clinton administration is showing no signs that it is ready to help the U.S. oil industry.
Two key energy officials, Deputy Energy Sec. Bill White and Minerals Management Service Director Tom Fry, spoke at a recent National Ocean Industries Association meeting here.
White was bullish on the long term prospects for the world oil and gas industry. He pledged the Clinton administration would never restrict the free market in oil and gas. And later, the administration offered support for a deepwater royalty relief bill currently in Congress.
NO SURPRISES
Fry, who angered offshore operators with a reexamination of Gulf of Mexico leasing practices, reassured them MMS will not spring any surprises. "Don't sit there and worry that something drastic is going to happen," he said. "It's not."
He predicted the administration will launch a program to examine the safety of aging pipelines in the gulf.
And he said the administration probably will ask Congress to consider revising the 1990 Oil Pollution Act's offshore oil spill insurance requirements.
He said regulators don't want to draft rules that would cripple the industry, but no one has told him how to get around the $150 million/project insurance requirement.
White said the administration realizes the insurance requirement should be commensurate with the risk of spills.
Fry said budget problems probably doom efforts to give coastal communities a share of federal offshore oil revenues. The same problems also threaten bills to reduce federal royalties for deepwater oil fields.
White said, "If done right, in the western and central Gulf of Mexico, you can increase revenues to the U.S. by reducing royalties and increasing production."
He saw problems, too. Should royalty relief be based on the cost of development or production? And should it be granted for all deepwater fields or case by case?
SHELL'S VIEW
Philip J. Carroll, Shell Oil Co. president and CEO, argued strongly for royalty relief. He said the gulf remains "a very fertile ground for exploration and development."
Carroll said oil companies are producing or developing 12 projects in more than 1,500 ft of water that will yield as much as 1.5 billion bbl of oil and gas equivalent.
"By our count," he said, "over 30 discoveries have been made to date in the deepwater, amounting to around 3-4 billion bbl equivalent. And this is with only about 15% of the leased acreage having been explored. The total deepwater potential could be much larger--perhaps 10-15 billion bbl, rivaling the oil volumes of Prudhoe Bay field."
Because billions of barrels of oil are at stake, Carroll said, the U.S. should imitate other countries that tailor their tax and regulatory policies to encourage development.
"No one should be asking for incentives that provide a windfall. Nobody should ask for a handout. But it would be foolish not to fight for incentives that benefit the economy, pay for themselves, and bring new production to market instead of throwing away these resources."
Copyright 1994 Oil & Gas Journal. All Rights Reserved.
