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[The biographical sketches of Mr. Haspel and Ms. Carpenter follow:]

BIOGRAPHY OF ABRAHAM E. HASPEL Abraham E. Haspel was appointed Assistant Director for Program Review in January 1988. Program Review has responsibility for Appeals, Budget, and Internal Review within the Minerals Management Service (MMS).

Mr. Haspel has been Staff Assistant/Economist to the Assistant Secretary for Land and Minerals Management, Department of the Interior (DOI); Economist, Office of Policy Analysis, DOI; and an Assistant Professor of Economics, State University of New York at Buffalo.

Mr. Haspel is a naturalized United States citizen who was born in Israel on De cember 19, 1949. He holds a bachelor's degree in Economics and Mathematics from Brandeis University (1971), a master's degree in Economics from the University of Pennsylvania (1973), and a Ph.D. in Economics from the University of Pennsylvania (1974).

BIOGRAPHY OF MARGARET J. CARPENTER Margaret J. Carpenter was appointed Budget Officer of the Minerals Management Service in September 1987. Prior to her appointment, she was a budget analyst in the Office of Budget, Department of the Interior.

From 1974-1984, Ms. Carpenter served as a management analyst and budget examiner for various Interior programs at the Office of Management and Budget.

She received a B.A. from Smith College in 1970 and an M.B.A. from the University of Michigan in 1974. She resides in the District of Columbia.

OPENING STATEMENT

Mr. BETTENBERG. I'd be pleased to do so, Mr. Chairman.
Mr. YATES. Okay.
Mr. BETTENBERG. It's a pleasure to be here again.
Mr. YATES. All right.

Mr. BETTENBERG. I think that we're off to a really good year in the Minerals Management Service.

Mr. YATES. By comparison to what?
Mr. BETTENBERG. Just in absolute terms.
Mr. YATES. Okay.

Mr. BETTENBERG. We're off to a very good year. We've held three sales in the Offshore Program this year already: one for sulphur and salt in February, one in the Beaufort Sea in March and one in the Central Gulf in March. The total number of leases from those will approach nearly 900, I believe.

In terms of revenue projections, those sales put us about $150 million ahead of our revenue projections at this point.

The leases that we oversee continue to provide about one-quarter of the Nation's natural gas supply, and one-eighth of its oil supply. We currently have a good exploration and development rate on the Outer Continental Shelf, and something that I've not been able to report in the past couple of years, because it is essentially new, is that a lot of that is beginning to pay off very well.

You recall in past years we've held sales in the Bering Sea, for instance. Exploration has taken place there, and there have been no commercial discoveries in that area. The same has been true in the Gulf of Alaska, and the Atlantic coast.

DEEP WATER EXPLORATION AND OPERATION

What we're seeing today is the deep Gulf of Mexico coming into its own. These are areas that were thought not to have great productivity just a couple of years back.

Mr. YATES. Where is this?

Mr. BETTENBERG. This would be south of Louisiana, east of Texas, that deeper section.

Mr. YATES. How far out?
Mr. BETTENBERG. About 50 miles.
Mr. YATES. About where the Gulf of Mexico is on the map?

Mr. BETTENBERG. Yes, out in the area on your map where the letter G in Gulf is and the words “Gulf” and “Of”.

Mr. YATES. That's out far, isn't it?
Mr. BETTENBERG. It is.
Mr. YATES. How deep is it there?

Mr. BETTENBERG. Well, we've had exploration in water as deep as 7,500 feet. We've had a fair number of discoveries in 1,000 feet and deeper. The greatest depth of existing production is just a little over 1,000 feet right now. We have production going in in the 1,500 to 2,000 foot range over the next couple of years. Companies are working on the platforms and getting things ready for it. It's a natural gas province, and it's one of the exciting kinds of discoveries that we've had with the program.

Mr. YATES. Any problems in connection with the piping of that gas and oil back to the mainland?

Mr. BETTENBERG. Not that I'm aware of. They, of course, have a nice network.

Mr. YATES. Is that piped now? Mr. BETTENBERG. Yes, it is. Mr. YATES. It is. Mr. BETTENBERG. Yes. All the gas is piped, and most of the oil. Mr. YATES. Well, when did we get the gas and oil? I'm not aware of that.

Mr. BETTENBERG. Do you recall when the first strike was? Probably about 1983 or 1984?

Mr. KRAHL. I would imagine.

Mr. YATES. Why did it take so long to come in? Did it take three or four years-

Mr. BETTENBERG. Oh yes, it takes longer than that to develop it. A lot of that hadn't been leased in the past.

Mr. YATES. There was no interest in leasing it?

Mr. BETTENBERG. There was some. Under the tract selection approach that had been used before, there wasn't that much. The tracts that were offered for lease tended to be the consensus tracts, if you will, of industry interest, and that tended to be in shallower water.

With the expanded sales, some of the tracts selected are beginning to go into deeper water, and some of them have been leased. We had several hundred of those tracts from the deep water area leased just in this last sale.

DEEP WATER DRILLING Mr. YATES. Why do you do that? What's the process by which they go down 7,500 feet and still maintain control?

Mr. BETTENBERG. Well, let me ask Dick Krahl to address that. He's our expert in that field.

Mr. KRAHL. Well, it's essentially the same process that you use in the shallow water.

Mr. YATES. Is it?

Mr. KRAHL. It takes a longer riser pipe. That's the umbilical cord between the ocean floor and the drilling rig.

Mr. YATES. You can go that far? What's the deepest well they've ever drilled?

Mr. KRAHL. About 7,520 feet is the record. That was last year. They're now drilling a well in about 7,500 feet of water.

Mr. YATES. Is that about the maximum that they can go under the present state of the art?

Mr. KRAHL. They believe that they can go down to 10,000 feet using this system.

Mr. YATES. They do? Does that throw open the whole Gulf to leasing, now that they're successful with this one? Are they going to attempt the same thing at other parts of the Gulf?

Mr. KRAHL. Well, they

Mr. YATES. Who is they when we're talking about this? Which company are we talking about?

Mr. KRAHL. Well, we're talking about Shell as the major operator out there in deep water. They have most of the tracts. But there are several major companies that are out there at that depth.

Mr. YATES. Okay.

I don't understand that. Here is something put out by the DuPont Company called the Juliet Project. It's Conoco and says Key Facts, and has this rendition of a platform and how it looks as it goes down.

It says water depth: 1,760 feet, a world's record for oil production from a platform.

Mr. KRAHL. Yes. This will be a tension leg platform. This is the first platform of this kind. It's being constructed in Singapore, and they've set a template on the bottom of the Gulf and are drilling the wells through that.

Mr. YATES. I see.
And what kind of a new platform is that?
Mr. KRAHL. It's called a tension leg well platform.
Mr. YATES. Yes.
Is this something that floats on top of the water?

Mr. KRAHL. Actually, it floats and it is held in position by tendons, if you would, that are in tension. It makes a very stable platform. The first one of these was put in the North Sea. This one will be the first one in the Gulf of Mexico.

Mr. YATES. Yes.
Well, that's quite an achievement, isn't it?
Mr. KRAHL. Yes, it is. It's a very innovative thing.
Mr. BETTENBERG. Going on from what's called the flexure trend
he deep Gulf of Mexico. Fairly near shore, above Mexico on the

that you're looking at over there, east of Louisiana, offshore Alabama and offshore the panhandle of Florida, there have been a number of producible well determinations.

Mr. YATES. Well, that's the Permian Basin, isn't it?
Mr. BETTENBERG. No, that's on-shore.
Mr. YATES. The Permian is on-shore? Isn't Permian offshore?
Mr. BETTENBERG. No, the Permian Basin is to the west.

Mr. YATES. Well, what's the one that I'm thinking of that they tried off the coast of the panhandle of Florida, that they never hit?

Mr. KRAHL. Destin Dome.
Mr. YATES. Destin Dome. Yes.

Mr. BETTENBERG. I was just going to remind you that you would have been here--and I would have been here—when they had the first leasing in what was called the MAFLA Area. There was some drilling that took place there roughly 12 years ago.

There's been a major deep gas discovery in Mobile Bay, and that field is being developed. It's part of what's called the Norphlet Trend that extends to the west and offshore of the panhandle of Texas down to roughly Cape San Blas, which is the lower part of the panhandle there. We have a couple of producible well determinations in that area.

Mr. YATES. Did you want to say something?
Mr. KRAHL. I think you mean the panhandle of Florida.
Mr. BETTENBERG. The panhandle of Florida. Excuse me.
Mr. YATES. Well, I thought it extended a long way over.
Mr. BETTENBERG. Sorry about that.

DEEP WATER EXPLORATION AND OPERATION

Mr. YATES. Well, is that touching the Destin Dome?

Mr. BETTENBERG. One of those producible well determinations is in the same area in which the Destin Dome drilling took place before.

Mr. YATES. Have they hit it now? Mr. BETTENBERG. But you're talking about deeper drilling there. Mr. YATES. Does that mean that they have finally found producible sands in the Destin Dome?

Mr. BETTENBERG. That's correct.

After essentially a dozen years of drilling they began to unlock the geology there.

Mr. YATES. I thought they'd stopped.
Mr. BETTENBERG. They've stopped several times.
Mr. YATES. Yes.

I thought the last information we had in testimony was that they'd given it up. They'd encountered some dry holes, and they'd said enough and given it up.

But what you're saying now is that they didn't give up.
Mr. BETTENBERG. No. They didn't give up.
Mr. Yates. Who are they in this instance?

Mr. BETTENBERG. Well, let's see: I know that Amoco is drilling in that area. Chevron is drilling in the eastern Gulf area, off the panhandle, and there are several other companies. Shell has been drilling a little deeper out in the De Soto Canyon area.

Mr. YATES. Does this mean that Shell has a technology advantage the others don't have? Is Shell willing to go out into deeper water and the others are not?

Mr. BETTENBERG. Shell is more aggressive in going out into deeper water.

Mr. YATES. More aggressive? Can all the companies do this?

Mr. BETTENBERG. Well, typically they hire a contract driller, and so far as I know, all of the Shell deep drilling has been done by contractors.

Mr. YATES. So any of the other

Mr. KRAHL. Any of the other companies could get those same contractors.

Mr. YATES. So who are the drillers? Do you recall?

Mr. KRAHL. Somat Incorporated is the one that's doing that deep drilling

Mr. YATES. I see.
It could be any number of companies?

Mr. KRAHL. It could be. These are all drilled with dynamically positioned ships, drilling vessels. There are, of course, a limited number of those, but they are available to any company.

RESERVE ESTIMATES FOR GULF OF MEXICO

Mr. YATES. Is there any estimate as to the reserves that are out there?

Mr. BETTENBERG. We make estimates all the time on those areas

Mr. YATES. Well, now, have you increased your estimates as a result of these?

Mr. BETTENBERG. Our current set of draft estimates for the Gulf of Mexico is up.

Mr. YATES. It's up.

Mr. BETTENBERG. Yes, the estimates are up over the last time we did this two years ago.

Mr. Yates. Did not the Geological Survey come out with an estimate a month or so ago in which they indicated that they had been too optimistic about our reserves?

Mr. BETTENBERG. Well, that's generally the current state of the development of that set of estimates, and we're in a similar position. Our estimates are up in the Gulf of Mexico and down in the Bering Sea from the last time that we did it.

Mr. YATES. Now, when you do it-
Mr. BETTENBERG. We do it offshore.
Mr. Yates. Do you bill it yourselves, or does GS do it for you?
How is it done?

Mr. BETTENBERG. Let me explain the process.
Mr. YATES. Okay.

Mr. BETTENBERG. We're responsible for doing it on the Outer Continental Shelf. The Geological Survey is responsible for doing it on land, essentially.

Mr. Yates. The Geological Survey's announcement, then, was directed to the on-land reserves?

Mr. BETTENBERG. Theirs would have been directed to the on-land reserves. We work closely with the Geological Survey when we do this. We have regional meetings so that when our geologists are

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