66% offshore and 45% onshore oil leases inactive

[DarrinS]

http://news.yahoo.com/s/ap/20110329/...obama_energy_4

WASHINGTON – An Interior Department report to be released Tuesday says more than two-thirds of offshore oil and gas leases in the Gulf of Mexico are sitting idle.

According to the report, obtained by The Associated Press, those inactive swaths of the Gulf could potentially hold more than 11 billion barrels of oil and 50 trillion cubic feet of natural gas. The report also shows that 45 percent of all onshore oil and gas leases are inactive.

President Barack Obama ordered the Interior Department review earlier this month amid pressure to curb rising gas prices. The White House says Obama will address his plans for the country's energy security during a speech in Washington Wednesday.

[Sec24Row7]

Uhh... so the landowner (US gov) got lease money for something that the Oil Co doesn't see fit to drill at the moment (or is in preparation to drill)

I really don't know why they are using the term "active". If you have paid for a lease, then it is "active". You are given a set time frame to plan/drill (10 years offshore 3 years onshore?) then the lease reverts back if there is no production.

Whats the problem? You can't drill everything at once. For one there are not enough rigs, secondly people take speculative leases that they will eventually drill if their idea pans out.

This is mumbo jumbo political speak to try to whip people up into a frenzy when really it is just standard business practice and makes all kinds of sense.

If they are reffering to leases that HAVEN'T been taken... Then how the is that the fault of the Oil Co's? Current interpretation/theory/economics don't make it profitable to lease in their opinion. Trust me... if any one of them thought that they could make significant amounts of money from an unleased parcel, they would lease it.

[Drachen]

it is trying to say that oil cos should quit asking for more land to drill since they aren't actually drilling on the claims that they already have.

[Winehole23]

It does seem disingenuous for oil companies to complain about the permitting backlog when they leave 2/3 of their offshore leases idle.

[Sec24Row7]

They can't get permits on THESE!! Lol

[CosmicCowboy]

They can't get permits on THESE!! Lol

They don't get it...

[Winehole23]

Get what?

[boutons_deux]

the oilcos are going after onshore natural gas, because it's cheaper to explore/extract than offshore, and, like with offshore or any resource extraction, the external costs (destroyed air, water, land) are born by citizens.

[CosmicCowboy]

Get what?

The difference between a lease and a permit to drill on the lease after they determine there is a reasonable probability of producing oil there.

[coyotes_geek]

Get what?

I believe the point CC & Sec are trying to make is that just because you have the lease doesn't mean you have the permit to drill on it.

[Winehole23]

All of the leases are inactive due to lack of permitting?

[coyotes_geek]

Extremely unlikely.

Although if you're a company who has 10 leases and only has the resources to drill one at a time, not being able to get that one permit could be interpreted as being responsible for holding up drilling on all 10 of your leases.

[Winehole23]

Don't get me wrong, Interior is dragging its feet for sure. The permitting gripe is real, but so are the crocodile tears imo.

[CosmicCowboy]

All of the leases are inactive due to lack of permitting?

Sec 24 knows more about the business than I do but a lot of onshore leases are speculative...the more "sure" an area, the higher the price per acre for the lease...there are a lot of very "iffy" areas leased onshore for a low price "just in case"...seismic crews are constantly working and the technology gets better and better and these leases are maintained just in case smaller pockets of economically feasible oil/gas are identified.

[coyotes_geek]

Don't get me wrong, Interior is dragging its feet for sure. The permitting gripe is real, but so are the crocodile tears imo.

Agree with you on both counts.

[MannyIsGod]

Correct me if I'm wrong, but aren't these leases also considered assets and thereby increase the value of the companies which hold them?

[coyotes_geek]

Actually I'd think leases would be liabilities. Leases cost money to hold and if you're not drilling on them they're not producing any revenue.

[boutons_deux]

Maddow destroyed the MMS and offshore guys the other night.

The "fixed up" emergency spill plan which was supposed to be in reaction to BP spill and basis for new deep-well permitting was written in .... 2009.

The fully captured/corrupted non-performing s-and-coke MMS and the drilling industry don't give a about spills or employee safety, only about profits.

And what about that $21B fine for BP based on the $35 fine per barrel spilled?

[Viva Las Espuelas]

Here's one that was approved pretty recently.
http://www.telegraph.co.uk/finance/n...echnology.html
New technology, huh? Floating storage near an area that just had a large spill. Mmmkay


Oh, and if Obama utters ethanol, I'm going to scream.

[RandomGuy]

Well . First let's start with the report itself:

http://www.doi.gov/news/pressrelease...&pageid=239255

It does give some data on the onshore lease process, including the backlogs of approved development plans, although such data is con uously missing from the offshore segment.

Best commentary I have read is here:

http://thehayride.com/2011/03/interi...-oil-industry/

Summary:
Report is simply ammunition/political fodder for the administration to give itself cover from charges that it isn't furthering domestic oil production.

It is a "political stunt", to borrow the words of the oil industry.

After all, industry representatives say, not every lease is home to valuable oil and gas — and it can take years to find out. In the meantime, lease-holding companies pay the federal government annual rental fees, on top of the money they already spent bidding on the drilling rights.

A long path of geological surveying, exploratory drilling, construction and permitting separates the initial lease sales from energy production, if oil and gas is even located on the site.

To be fair though, if an industry making HUNDREDS OF BILLIONS OF DOLLARS IN PROFIT *really* wanted to further the process along, they have more than adequate resources to do so, regulatory transigence or no.

Quite frankly it seems as both the administration and the industry are attempting to spin this in a way that suits them.

[RandomGuy]

Correct me if I'm wrong, but aren't these leases also considered assets and thereby increase the value of the companies which hold them?

They are considered assets, but you give up other assets, i.e. cash to get them and hold them.

My understanding:

They ultimately only really increase the value of the company if there is actually oil that can be economically recovered in them. They are more like "options" than anything else.

It is akin to buying raffle tickets, in that regard. The value of any given ticket is hard to figure until the results are known. You could have a 40" plasma screen ticket or an Aunt Mertha's fruitcake ticket.

Long answer short:
They increase the value of the company, but not by much in the short run.

[Viva Las Espuelas]

Duck season/wabbit season

[RandomGuy]

Don't get me wrong, Interior is dragging its feet for sure. The permitting gripe is real, but so are the crocodile tears imo.

Agreed.

Seems you beat me to it, and in much less verbiage, as usual.

[RandomGuy]

Duck season/wabbit season

[Wild Cobra]

It does seem disingenuous for oil companies to complain about the permitting backlog when they leave 2/3 of their offshore leases idle.

I don't recall all the details I heard, but a large part was that expected payoff of many of these leases is low or negative, unless the price of oil rises. The other part is the new offshore drilling moratoriums in place by the current administration.

More non-news generated only for political purposes.