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U.S. offers drillers nearly all offshore waters, but focus is on eastern Gulf

Ernest Sheyder and Valerie Volcovici

HOUSTON/WASHINGTON (Reuters) – President Donald Trump’s administration has proposed opening up nearly all of America’s offshore waters to oil and gas drilling, but the industry says it is mainly interested in one part of it, now cordoned off by the Pentagon: the eastern Gulf of Mexico.

The industry’s focus on an area located near a sprawling network of existing platforms, pipes and ports could ease the path to new reserves, and assuage the drilling opponents near other places offered under the Interior Department’s proposed drilling plan issued last week, like California’s Pacific, the Atlantic and Arctic.

Sajjad Alam, an analyst focusing on oil and gas in Moody’s corporate finance group, said the high costs and difficulties in many of the areas offered for lease under the plan are likely to keep them low on an oil company’s priority list.

Recent leasing statistics in the Gulf of Mexico already show soft demand for acreage from the oil industry.

The amount of money per acre that oil companies spent in the Gulf in 2017 was about a third what they spent in 2013 when oil prices were higher, according to a Reuters review of government data. Energy firms bid for less than 1 percent of total U.S. acreage in 2017, compared with 4.5 percent in 2013.

But for oil companies, the option of exploring new areas is nice to have, and one they might exploit if oil prices rise.

“We’d like an opportunity to look at all of the areas (including the Eastern Seaboard and Alaska),” said Tracy Krohn, the chief executive of W&T Offshore Inc (WTI.N), which currently produces oil in the Gulf of Mexico.

“I don’t know that we would exclude any areas.”

The API said some of its members could be interested in looking at parts of the mid- and southern-Atlantic too, because of successful wells drilled in similar geology off Brazil, Africa and Canada.

“It would make sense to go out there and run seismic and do some exploratory drilling down the road,” said Erik Milito, API’s director of upstream operations.


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