Offshore Technology Conference
Johnnie Burton – Talking Points
for
Panel Discussion by Women in Energy
Tuesday, May 4, 2004, 2 – 4:30 p.m.
Houston, Texas
Good afternoon. I am delighted to be here today.
Four months after the President took office, he issued a National Energy Plan. By Washington’s standards, this was done with lightening speed. This shows the importance this Administration places on the supply of energy to fuel our economy and support the American way of life.
The Department of the Interior is America’s public resource manager, with over 280 million onshore acres and a whopping 1.76 billion offshore acres of land under the Department’s jurisdiction.
Securing America’s energy future through domestic energy production is critical for national security. I am grateful to have a few minutes to provide you with an update about our efforts in the Gulf of Mexico to bring these domestic energy resources to market.
The MMS, established in 1982, manages and regulates our Nation's rich offshore mineral resources. MMS also collects and disburses the revenues generated by production of both onshore and offshore Federal minerals as well as Indian minerals – which amounts to billions of dollars in royalties, rents, and bonuses annually.
MMS has distributed an average of more than $6 billion per year for the last 22 years. The money goes to the Nation, States, and American Indians.
PRESIDENT BUSH’S ENERGY POLICY
The President’s energy policy requires many actions. Some of those cannot be implemented without legislation. The energy bill is still being debated in Congress. But many of the recommendations can be implemented by various bureaus within the DOI, and they are.
Although the main role of MMS is that of a regulator and revenue collector, we also have a secondary but still very important role in facilitating, and sometimes even encouraging with financial incentives, the production of energy offshore and lately I have taken the role of “educator”.
Our sister agency, the Bureau of Land Management ably directed by Kathleen Clarke, plays the same role of manager/regulator and facilitator of mineral production onshore. So the Department of the Interior is truly America’s public resource manager.
We recognize that the Gulf of Mexico is the Nation’s preeminent source of oil and natural gas and I would like to focus on a couple of major frontier areas we are emphasizing before I talk about our research efforts on the environment and technology.
DEEPWATER
The deepwater success story of the last decade has led to an increase of over 75 percent in the amount of crude oil produced from our offshore waters.
The royalty incentives first passed by Congress - then extended by this Administration - played a part in the activities seen in very deep water in the Gulf.
These incentives have helped bring about a remarkable increase in production in the Gulf of Mexico deep water frontier. Deep water oil production rose 535 percent between 1995 and 2002. At the same time, deep water gas production rose 620 percent.
At the present time, there are about 140 deep water discoveries of which about 86 are producing. This has helped increase total offshore production from slightly less than 1 million barrels per day in 1995 to 1.7 million barrels per day in 2003.
There are several major projects scheduled to come online in the 2004 – 2006 time frame including Thunder Horse – the largest discovery in the United States in the last 35 years.
We all recognize that operating in the deep water requires vision, planning and acceptance of risk, and the offshore industry deserves a significant amount of credit for taking on the huge financial burden required to be on the leading edge of this frontier.
Coordinating the partnerships required to afford the investment this kind of operating environment requires is an exceedingly complex undertaking. However, industry has established some important partnerships recently that make it feasible to drill deeper, and farther from shore than ever before.
Late last year, for example, Anadarko and its partners unveiled the Marco Polo hub, the newest technological marvel that will make the deep waters more hospitable. The Marco Polo oil and gas production platform, the world’s deepest offshore tension leg platform, was installed in 4,300 feet of water.
Also late last year, Transocean Inc. and Chevron Texaco set a new world record when the drill ship “Discoverer Deep Seas” spudded an exploration well in 10,011 feet of water in the Alaminos Canyon Block 951 of Chevron Texaco’s Toledo prospect.
And, another important partnership led by BP is investing more than $1 billion to develop the largest deep water pipeline system in the world. BP’s Mardi Gras transportation system is slated for completion in 2006. This system will serve several fields with many owners.
At a depth of more than 7,000 feet, Mardi Gras will be the highest-capacity deep water pipeline ever built, with the capacity to transport more than 1 million barrels of crude oil a day, and 1.5 billion cubic feet of gas.
If current trends continue, as much as 77 percent of daily oil production in the Gulf and 26 percent of daily gas production could come from the deep water Gulf of Mexico by 2006. At MMS, we are dedicated to doing as much as we can to ensure that we reach this goal.
DEEPSHELF GAS
Another critical area for future development is the deep shelf area in shallow waters of the Gulf of Mexico.
In January, MMS announced new incentives for development of deep gas. We expect the incentives to spur new production and save American consumers more than $5 billion during the next decade and create as many as 26,000 jobs.
We have already seen a positive response to these and earlier incentives. At a recent lease sale, the most noteworthy item was that 60 percent of the bids were on the shelf. We saw some of the players coming back to the shelf.
The gas production from the shallow waters of the shelf is declining rapidly but geologists are excited about the probability of natural gas accumulations below the shallow plays that have been producing for years.
However, only 5% of wells drilled on the shelf have gone below 15,000 feet and we think that natural gas can be found below 15,000 and so does industry. This is expensive and risky drilling. We hope the incentives we offer do help industry make the necessary investment.
RESEARCH and TECHNOLOGY
We recognize that a strong research program is essential if MMS is to properly regulate and monitor those new technology challenges.
As you in industry develop new technologies to explore deeper water and drill deeper into the earth, we at MMS continue working to improve our understanding of the environment in which these activities occur.
Over the last 20 years, MMS has funded more than $600 million in research. Currently, more than 200 research projects are underway in the Gulf of Mexico, Pacific and Alaska regions.
This year’s research priorities include ultra-deepwater risers, repair techniques for aging infrastructure, and oil spill response and recovery in Arctic conditions. This research promises to help boost both our energy production and our safety record in offshore waters.
Environmental protection and worker safety MUST accompany energy production.
In the last 20 years, the record shows that the offshore industry is one of the safest industrial activities in the United States.
Every year since 1983, MMS has recognized excellence in offshore safety performance -- this year at an awards luncheon and ceremony held right here in Houston, just last week. We had some 620 people attending the event to see 15 energy companies honored by MMS for offshore safety and environmental achievement.
In short, at MMS, environmental monitoring and energy exploration go hand in hand.
As I said in the beginning, this Nation is facing major hurdles in meeting today’s energy needs. At least part of that need has to be met through stepped up domestic energy production, while the search for alternative energy and increased emphasis on conservation continue.
Working with partners from academia and our stakeholders in the energy industry, MMS plays an important role in securing ocean energy for America and protecting the natural environment.
Thank you.