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Deepwater Gulf of Mexico - America's Expanding Frontier
SOURCE: U.S. Department of the Interior, Minerals Management Service, Gulf of Mexico OCS Region






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).

Figure 28. Anticipated lease expirations in the Gulf of Mexico 2004-2009.
Figure 28. Anticipated lease expirations in the Gulf of Mexico 2010-2013.
Figure 28. Anticipated lease expirations in the Gulf of Mexico.

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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Cover and Title Page

PREFACE

INTRODUCTION

BACKGROUND

LEASING DRILLING AND DEVELOPMENT RESERVES AND PRODUCTION SUMMARY AND CONCLUSIONS . . . Feedback