A US federal judge has ordered federal lease sales for the US Gulf of Mexico, Alaska and onshore tracts should continue, ruling against President Biden’s suspension of new oil and gas leases in federal waters and lands
The temporary injunction by US District Judge Terry Doughty came as the result of a lawsuit filed in March 2021 by Louisiana Attorney General Jeff Landry and officials from 12 other states. In a move to support his climate change agenda, the President had suspended the new oil and gas lease sales in an executive order on 27 January. The suspension did not impact drilling under existing leases. Further arguments will be heard in the case.
Offshore energy interests applauded the ruling and called for an immediate resumption of the oil and gas leases sales. “The Department of the Interior is required by law to expeditiously develop America’s energy resources, and this includes the obligation to schedule and hold offshore oil and gas lease sales,” said National Ocean Industries Association (NOIA) president Erik Milito. Mr Milito said offshore oil production in the US Gulf of Mexico supports 345,000 jobs and produces vital government revenues and has “the lowest carbon intensity of the oil producing regions”.
He cited an Obama Administration review of the 2017-2022 Five-Year Plan for offshore oil and gas leasing that determined greenhouse gas emissions “would be higher without these lease sales because energy production would be outsourced to foreign counties resulting in a higher carbon footprint. All of these benefits coalesce around many of the priorities of the Biden Administration.”
In addition, some US$6Bn in government revenue was generated last year as the result of drilling on federal lands and in federal waters.
“This is fantastic news for workers in Louisiana whose livelihoods are being threatened by the administration’s thoughtless energy policy” said US Senator Bill Cassidy (R-Louisiana) in a statement. “The President should not be able to take away tens of thousands of jobs to fulfill a campaign promise. We need a long-term, all-of-the-above strategy that does not pick winners and losers. The Department of the Interior should immediately begin moving forward with another offshore lease sale.”
Senator Cassidy is the sponsor of legislation, Protecting our Wealth of Energy Resources (POWER) Act of 2021, which seeks to prohibit the President and US Secretaries of Interior, Agriculture and Energy from blocking energy and mineral leasing and permitting on US federal lands and waters.
The US offshore rig count was 13 on 11 June, unchanged week-on-week and year-on-year, according to Baker Hughes. Slightly less than two years ago, offshore drilling hit its highest level since 2016, with 26 offshore drilling rigs contracted in the US Gulf of Mexico.
Floaters rise on activity in North Sea, South America
Globally, there were 453 offshore drilling rigs active during week 24 2021, according to Westwood Global Energy’s RigLogix, with the active jack-up rig count remaining stable at 333 and floaters jumping to 120 units, led by South America and the North Sea.
In the North Sea floater market, NYSE-listed offshore driller Transocean Ltd reported contracts worth US$116M. The semi-submersible Transocean Barents was awarded a two-well contract in Norway with commencement expected in February 2022. The contract award is approximately 200 days in duration and adds an estimated US$60M in firm contract backlog.
Additionally, the semi-submersible Transocean Norge was awarded a four-well contract plus five one-well options in Norway with commencement expected in March 2022. The contract award is approximately 200 days in duration and adds an estimated US$56M in firm contract backlog.
Meanwhile, Dubai-based Shelf Drilling secured a one-year contract for the jack-up rig Shelf Drilling Tenacious with Cabinda Gulf Oil Company Ltd, a subsidiary of Chevron, for operations offshore Angola. The contract is expected to commence in January 2022 and includes multiple option periods.
Brent crude continues rally
Brent crude oil continues to rally, hitting US$74.29 per barrel for August contracts at 8:06 am EDT on 16 June, according to Bloomberg.
Market optimism could push oil to US$75 and beyond. “This week keeps on giving for oil prices, as back-to-back positive signals keep prolonging the bullish rally,” said Rystad Energy oil markets analyst Louise Dickson.
“Oil demand is not only supporting oil prices at a forecast level. The real results of the demand recovery are now visible too, with the latest touch being the API institute’s projected massive 8.5M barrel storage draw in the US.
“Forecasts for a massive inventory draw provide a definitive optimism boost and are pushing oil prices towards US$75 per barrel,” she said.
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