iii

Deepwater in the Gulf of Mexico:

America's New Frontier

Minerals Management Service

Executive Summary

This paper describes the extent and types of oil and gas exploration and development activities

that are taking place in the deepwater portion of the Gulf of Mexico Outer Continental Shelf

(OCS). The impacts on the workload and demands on the Minerals Management Service

(MMS), particularly the Gulf of Mexico OCS Regional Office, as a result of deepwater activities

are just beginning to occur. The full magnitude of the impacts is not yet known, although some

specific impacts are emerging and others can be anticipated. 

Favorable economics, the development of three-dimensional (3D) and subsalt geophysical

technologies, the announcement of several deepwater discoveries, the development of new

deepwater drilling and development technologies, the passage of the Deep Water Royalty Relief

Act, and the opportunity to lease new prospects have all contributed to the revitalization of

exploration and development in the Gulf of Mexico. After the recent implementation of

deepwater royalty relief measures, specifically designed to support the development and

production of deepwater tracts, the MMS received record bids in both 1996 lease sales. In 1994

and 1995, there were 210 blocks leased in 900 meters (approximately 3,000 feet) or greater water

depth; in the 1996 sales, there were 712 blocks leased in that water depth. 

Deepwater operations are significantly different from conventional operations in shallower waters

of the shelf. Deepwater operations are significantly farther from shore, encounter different

environmental conditions, are technologically more sophisticated, may produce at much higher

rates, and are subject to different economic determinants. These differences will significantly

impact the MMS Gulf Region's workload and present many technical and regulatory challenges.

The number and complexity of Exploration Plans, Development Operations Coordination

Documents, pipeline applications, applications for permits to drill, and requests for regulatory

departures or alternative compliance will continue to increase. In addition, the MMS has

established requirements for the submittal of Deepwater Operations Plans and Conservation

Information in support of proposed deepwater operations. New and evolving technologies, larger

and more complex facilities, modifications of procedures, and additional environmental

protection issues are all anticipated for deepwater activities. The MMS technical, safety, and

environmental reviews of these proposed deepwater activities will take longer and require new

expertise. The MMS is working diligently to keep pace with the evolving deepwater issues and

technical expertise, and has developed the regulatory framework required to be an effective

manager and regulator of these deepwater areas. 

The challenges of effectively managing and regulating exploration and development activities

in the frontier deepwater areas are in addition to ever-increasing demands of the OCS Program

in the shallower water areas of the Gulf. 

v

Table of Contents

Figures vii

Tables vii

Introduction 1

Deepwater Activities and Trends 7

Leasing Activities 7

Prelease 7

Leasing 7

Exploration Activities 8

Plans and Permitting 8

Drilling 9

Discoveries 9

Production and Reserves 11

Technology 11

Impact of Deepwater Activities on the MMS 17

Leasing Activities 18

Geological and Geophysical Permitting 18

Resource Estimates and Exploration/Development Projections 19

Environmental Studies 19

Lease Sale Environmental Impact Statements 20

Lease Administration and Adjudication 21

Bid Evaluation 21

Reserves and Resource Evaluation 22

Exploration, Development, and Production Activities 23

Exploration and Development Plans 23

Pipelines 23

Technical Review 24

Unitization 27

Deepwater Royalty Relief 28

Conservation 29

Inspection and Enforcement 31

Structure Removal and Site Clearance 31

Other Workload Factors 33

Summary 35

Appendix 1: Deepwater Activity Indicators 37

Appendix 2: Deepwater Production and Discoveries 39

vii

Figures

Figure 1. The Gulf of Mexico Outer Continental Shelf 2

Figure 2. Deepwater Discoveries in the Gulf of Mexico 10

Figure 3. Deepest Gulf of Mexico Production Platform, 1976-1996 11

Figure 4. Deepwater Development Systems in the Gulf of Mexico 14

Figure 5. Gulf of Mexico Pipelines Approved (1992-1996) 15

Figure 6. Major New Deepwater Oil and Gas Pipelines in the Gulf of

 Mexico, 1995-1996 25

Tables

Table 1. 1995 U.S. Oil and Gas Production 1

Table 2. Gulf of Mexico OCS Activities FY 1992-FY 1998 4

Table 3. Overview of MMS OCS Regulatory Compliance 5

Table 4. Gulf of Mexico OCS Lease Sales 1992-1996 8

Table 5. Announced Gulf of Mexico Projects by Water Depth 15

Table 6. Geological and Geophysical Exploration Permits in the 

 Gulf of Mexico, 1992-1996 19

Table 7. Typical Departures/Alternative Compliance for Deepwater Projects 26

Table 8. Technology Assessment and Research Program Contracts and 

 Cooperative Agreements to Support Deepwater Development 28

Table 9. Routine and Nonroutine Conservation Requests 30

1

Deepwater in the Gulf of Mexico: 

America's New Frontier

Minerals Management Service

Introduction

The purpose of this paper is to describe the extent and types of oil and gas exploration and

development activities that are taking place in the deepwater portion of the Gulf of Mexico Outer

Continental Shelf (OCS) (see Figure 1). (Within this report, unless otherwise noted, “deepwater”

refers to water depths greater than 1,000 feet or 305 meters.) These activities are then considered

in relation to the effects they will have on the operations and workload of the Minerals

Management Service (MMS). Although the pace of deepwater activities has accelerated rapidly,

the impacts to the MMS are just beginning. While the bulk of the workload for deepwater

development will fall to the Gulf of Mexico Regional Office, staff loads, both technical and

administrative, have and will show an increase in the headquarters and royalty management

offices of MMS as well. The full magnitude of the impacts is not yet known, although some

specific impacts are emerging and others can be anticipated. 

For 50 years, oil and natural gas have been produced from the OCS underlying the Gulf of

Mexico. This production represents more than 83 percent of total OCS oil production and more

than 99 percent of all OCS natural gas production. In 1995, production from this area accounted

for 15 percent of all oil produced in the U.S. and 26 percent of the natural gas (see Table 1). To

date, most of the Gulf’s production has come from fields located in relatively shallow waters.

A new era for the Gulf of Mexico has begun with the intense interest in the oil and gas potential

of the deepwater areas. 

Table 1. 1995 U.S. Oil and Gas Production

Source Oil Gas 

(barrels) (thousand cubic feet)

U.S. Domestic Production 2,394,400,000 18,902,000,000

Total OCS Production 429,190,000 5,015,000,000

 Gulf of Mexico OCS 356,759,337 4,952,335,754

 Deepwater 47,169,705 196,723,756

 Gulf of Mexico 

 Pacific OCS 72,430,663 62,664,246

A long, slow decline had been forecast for production from the Gulf of Mexico because it was

thought that all of the most-promising shallow-water fields had already been found and were

approaching or past their peak production levels. Recently, however, this perception has changed
2

Figure 1. The Gulf of Mexico Outer Continental Shelf. (Index map)
3

markedly. Due largely to a combination of favorable economics, recent discoveries in the

deepwater shelf and slope regions of the Gulf, availability of infrastructure, deepwater royalty

relief, the opportunity to lease new prospects, and the use of new technology to extend the life

of current fields and accurately find new ones, the Gulf of Mexico OCS is once again the scene

of a relatively intense search for new oil and gas fields. This turnabout is concentrated in the

Central and Western Planning Areas of the Gulf of Mexico. Production from the Gulf of Mexico

OCS is expected to increase dramatically over the next four years. By the year 2000, oil

production is forecast to increase by as much as 70-100 percent. The MMS Gulf of Mexico

Region projects an increase in oil production from 0.9 million barrels per day to as much as 1.7-

1.9 million barrels per day. The MMS projects that gas production will remain fairly steady or

increase from 13.9 billion cubic feet per day in 1995 to as much as 17.2 billion cubic feet per day

in 2000.

The technology employed by the offshore industry to find and develop oil and gas changes

significantly in deeper waters beyond the shelf edge. Over the past several years, the results of

industry’s search for deepwater prospects have appeared in press releases, journals, and

newsletter articles. The tone of the media reports reflects the intense interest of the oil and gas

industry and the enthusiasm of support industries. Deepwater development represents new

economic opportunities for many companies and individuals both in the Gulf of Mexico coastal

zone and beyond.

Deepwater operations differ from those conducted in the shallower waters in that they

may be significantly more remote;

may be subject to different environmental conditions;

may be technologically more sophisticated;

may produce at much higher rates; and

are typically subject to different economic determinants.

Renewed industry activity and interest in the Gulf of Mexico have expanded the Regional

Office's workload over the past few years, are anticipated to continue increasing workload over

the next several years (see Table 2), and will have extensive repercussions on the efforts required

by the MMS Gulf Regional Office to meet its mission responsibilities. The growth in workload

will be attributable in part to the continued investigation and analysis of operating requirements

for complex, technically advanced deepwater systems, and to the continued development of staff

expertise to perform such analyses. 

There are many unknowns in the deepwater area, both environmental and technical. Many

regulations will have to be revised and new policies and guidance will need to be developed.

Undoubtedly, a number of unanticipated issues or consequences that require new approaches or

processes will surface as deepwater activities intensify. Emphasis on deepwater development and

the associated innovative technology for drilling and production, as well as the need to address

engineering, safety, and unique supplemental bonding issues, will present challenges to the

Region’s regulatory function. The major components of the MMS regulatory and environmental

coordination and review process are outlined in Table 3.
4

Table 2. Gulf of Mexico OCS Activities FY 1992 - FY 1998 

FY FY FY FY FY FY FY

1992 1993 1994 1995 1996 1997* 1998*

Industry Activity

 Total Active Leases 5,000 5,196 6,500 8,300

 Exploratory Wells Drilled 210 318 387 361 446 460 480

 Plans of Exploration/Development 407 572 719 711 768 800 850

 Deepwater Operations Plans - - - - 13 40 50

MMS Gulf of Mexico OCS Region

Activity

 Environmental Assessments 203 231 198 145 236 245 260

 Categorical Exclusion Reviews 733 927 1,143 1,138 1,196 1,350 1,500

 Air Quality Reviews 355 602 1,148 1,255 998 1,400 1,600

 Archaeological Reviews 488 406 648 664 740 900 1,000

 Oil Spill Plan Reviews 589 851 752 879 604 1,100 1,200

 Inspections 7,500 9,100 9,900 10,500 10,600 11,600 12,700

 G&G Permits Processed 126 126 135 106 126 140 150

* projected
5

Table 3. Overview of MMS OCS Regulatory Compliance

Prelease Activities

Review and approval of Geological and Geophysical Permits

Adjudication actions (e.g., Qualification of Companies*, Equal Employment Opportunit y

Certification*)

Leasing Activities

Conducting lease sales (e.g., sale statistics, seismic data acquisition, bid evaluation, issuing lease

instruments)

Adjudication actions (e.g., Bond Coverage*, De signation of Operator*, Certification of Financial

Responsibility*, Lease Stipulations and Regulations)

Lease Exploration Activities

Monitoring preliminary activities (e.g,. soil boring, 3D seismic surveying, shallow hazard s

surveying, archaeological surveying, live bottom surveying)

Technical, safety, and environmental reviews of plan s and applications (e.g., Plan of Exploration,

Application for Permit to Drill, Hydrogen Sulfide Control Plan, Oil Spill Contingency Plan)

Monitoring and inspections of drilling operations for exploratory and delineation wells (e.g. ,

Sundry Notice, Conditions to Drill, Final Location Report, Weekly Progress Reports, on-sit e

inspections, Well Summary, Wel l Test Notification, Application for Well Producibility, Caisson

Application, Plug and Abandonment)

Lease Development Activities

Technical, safety, and environmental reviews of plans and applications (e.g., Developmen t

Operations Coordination Document, Deepwater Operations Plan, Structure Application, Safety

System Design and Installation, Application for Permit to Drill, Hydrogen Sulfide Control Plan,

Oil Spill Contingency Plan, Pipeline Application)

Monitoring and inspections of well drilling operations for production wells (e.g., Sundry Notice,

Safety Device Training, Weekly Pr ogress Reports, Notice of Installation, Application for Permit

to Drill)

Production Phase Activities

Conservation and Rate Control (Unitization, Suspension of O perations, Suspension of Production,

Maximum Efficient Rate, Maximum Production Rate, Gas Cap Production, Production withi n

500 feet of Lease Line, Application to Commingle Production, Downhole Commingling, Meter

Proving Reports, Royalty Meter Run Tickets, )

Royalty Management (e.g., Liquid Hydrocarbon and Gas Measurement)

Continuing monitoring and inspections of production operations (e.g., workovers, temporar y

abandonment, annual inspections, erosion control program, disposal of wastes)

Continuing adjudication actions (e.g., De signation of Operator, Assignments, Bonds, Mortgages)

Lease Termination Activities

Technical, safety, and environmental reviews of plans and application s (e.g., Sundry Notices, plug

and abandon wells, platform removal, site clearance, pipeline abandonment)

Monitoring and inspections of abandonment operations

Adjudication actions (e.g., lease relinquishment and termination, cancel certificate of financial

responsibility) 

*Many adjudication actions are performed repeatedly throughout the term of a lease.
6
7

Deepwater Activities and Trends

Many OCS activities reflect the trend toward increasing deepwater leasing, exploration, and

development (see Appendix 1). Much of the information presented in this report has been

publicly released by companies, reported by the industry trade press, or generated by the MMS.

These data are subject to frequent updates.

Leasing Activities

Prelease

Although the number of deepwater geophysical permits issued by the MMS has remained

relatively constant over the past five years, MMS anticipates an increase in the number of permit

applications for deepwater geophysical surveys. Since the passage of deepwater royalty relief

legislation, the geophysical surveying companies have indicated that they anticipate numerous

speculative deepwater surveys. In addition, recent surveys cover larger areas, include more linemiles of data, and are in progressively deeper areas. State-of-the-art 3D seismic data have

enabled industry to identify, with greater precision, where the most promising deepwater

prospects are located. This 3D technology is being used in developed areas on the shallower

shelf to identify bypassed hydrocarbon-bearing zones in currently producing formations and new

productive horizons near or below currently producing formations. It is also being used in

developed areas for reservoir monitoring and field management.

Leasing

For some time, industry had only a low-level interest in leasing in the deepwater areas in the Gulf

of Mexico. Industry interest and leasing have escalated significantly since the passage of the

Deep Water Royalty Relief Act (see Table 4). The Deep Water Royalty Relief Act (DWRRA)

defines deepwater as greater than 200 m (656 ft), although for operational considerations in the

Gulf, deepwater is greater than 305 m (1,000 ft). The DWRRA establishes three zones based on

water depth for different levels of royalty relief: 200-400 meters, 400-800 meters, and greater

than 800 meters. In 1995, the overall number of tracts bid on and later awarded leases (in water

depths greater than 400 meters (1,312 feet)) multiplied fourfold (400%) from the average of the

previous two years, and these deepwater leases accounted for 33 percent of all leases awarded.

The 1996 Central Gulf of Mexico Sale 157 was the largest lease sale ever held in the Gulf of

Mexico in terms of the number of tracts bid on and resulted in the addition of 430 leases in water

depths greater than 400 meters. An additional 392 leases in water depths greater than 400 meters

result from 1996 Western Gulf Sale 161.

To date, the most significant players in the Gulf’s deepwater oil and gas arena have been the

major oil companies. Shell Offshore has clearly been the leader. Other major companies (e.g.,

BP Exploration, Amoco, Mobil, Exxon, and Texaco) are actively increasing their lease holdings

and drilling operations. Independents (e.g., Oryx, Enserch, CNG, Marathon, Conoco, BHP

Petroleum, and Louisiana Land and Exploration) are also gaining a foothold as primary lease

holders, particularly in the shallower sections of the deepwater Gulf, or as partners with major

oil companies. Recent entrants include foreign-owned companies (e.g., Statoil (Norway) and

Enterprise Oil (United Kingdom)). In addition, both major and independent companies have

shown an increasing and renewed interest in the shallow areas of the Gulf.
8

Table 4. Gulf of Mexico OCS Lease Sales 1992-1996

Sale Sale Number of Total 

Number Date Companies Leases

Participatin

g

Leasing by Water Depth Categories*

< 200 m 200-400 m 400-900 m > 900 m

 No. % No. % No. % %

No.

139 5/13/92 64 144 120 83% 4 3% 13 9% 7 5% 

141 8/19/92 38 60 56 93% 0 0% 4 7% 0 0% 

142 3/24/93 61 187 152 81% 5 3% 23 12% 7 4% 

143 9/15/93 48 149 109 73% 10 7% 13 9% 17 11% 

147 3/30/94 82 368 307 83% 7 2% 24 7% 30 8% 

150 8/17/94 57 192 159 83% 18 9% 6 3% 9 5% 

152 5/10/95 88 572 383 67% 18 3% 58 10% 113 20% 

155 9/15/95 60 263 126 48% 34 13% 45 17% 58 22% 

157** 4/24/96 93 902 444 49% 28 3% 38 4% 392 44% 

161** 9/25/96 72 606 176 29% 38 3% 72 12% 320 53% 

*Due to rounding, the percentages for water depth categories may not sum to 100%. 

**Sales 157 and 161 were held after the enactment of the Deep Water Royalty Relief Act.

Exploration Activities

Plans and Permitting

Between 1992 and 1996, the number of submitted exploration and development plans almost

doubled (see Table 2). The number of Applications for Permits to Drill deepwater wells in the

Gulf of Mexico OCS approved by the MMS more than doubled between 1993 and 1995, from

41 to 85.

The MMS prepares environmental assessment documents (Categorical Exclusion Reviews or sitespecific Environmental Assessments) for all plans for exploration and development and for

pipeline applications. Environmental review and protection, as well as safety and technical

review, in deepwater areas will present special challenges for the MMS. Fewer environmental

studies have been conducted in the deeper water areas of the Gulf. The potential impacts of the

technologies evolving to meet the requirements of deepwater exploration and development are

not well known. Some of the issues that the MMS addresses in the safety, technical, and

environmental reviews are 

new and unusual technologies;

oil-spill contingency planning;

sour-gas production;
9

chemosynthetic communities;

live bottom areas;

pinnacle and other hard-bottom habitats;

air quality;

water quality;

endangered and threatened species;

pipeline tows and landfalls; and

lease abandonment and decommissioning operations.

Drilling

Drilling rigs operating in the deep waters of the Gulf of Mexico more than quadrupled between

1991 and 1996, from an average of 4 rigs drilling monthly to 17 rigs. Drilling activities are

currently constrained by the overall availability of rigs capable of working in these water depths,

the availability of rig crews, and riser availability. Because of the number of attractive prospects

in deepwater areas and increasingly favorable project economics, most deepwater rigs are already

under long-term contracts with various oil and gas operators. Though there is some movement

of deepwater rigs to the Gulf of Mexico from international waters, similar constraints in the

international market limit the number of rigs that can be moved. Increasingly, the trend in the

deepwater drilling market is the conversion and upgrade of other rigs or vessels to deepwaterdrilling-capable rigs. A small number of new rigs are also under construction. (Conoco

announced in October 1996 a joint venture to build a $200 million drillship that will be able to

operate out to 10,000 feet water depth.) Very few of these conversions or new builds are

speculative projects; most of these projects are under long-term contracts to oil and gas operators

before construction even begins.

Discoveries

Discovery of OCS deepwater fields in the Gulf of Mexico began accelerating in 1994 (see

Appendix 2). The vast majority of these discoveries have been in the Central Gulf offshore

Louisiana and Mississippi (see Figure 2). Though Shell Offshore has been the pioneer in the

deepwater Gulf, other companies have been quick to recognize the potential of this province as

Shell began to show that there were indeed sizeable fields to be found. Shell’s announcements

of large discoveries in the Tahoe (1984), Bullwinkle (1985), Auger (1987), and Mars (1989)

fields have heightened interest in this region. During the past two years, industry has announced

plans to develop many of the recent deepwater discoveries (see Appendix 2) including Texaco’s

Petronius and Gemini prospects; Shell’s Ram-Powell, Ursa, and Mensa prospects; Chevron’s

Genesis prospect; and BP’s Troika and Marlin prospects.
10

Figure 2 Deepwater Discoveries (map)
11

Production and Reserves

In 1995, the 47.2 million barrels of oil (MMBO) produced from deepwater Gulf of Mexico OCS

prospects accounted for more than 14 percent of total Gulf OCS oil production; the 196.7 billion

cubic feet (Bcf) of deepwater gas accounted for about 4 percent of total Gulf natural gas

production (see Table 1). It is interesting to note that deepwater oil production increased 260

percent over the 5-year period 1992-1996; deepwater gas production increased 375 percent

during this same period. During this same time, the number of producing deepwater fields more

than tripled, from 5 to 18 fields. 

Projections for Gulf of Mexico oil and gas production through 2000 range widely, depending on

which assumptions are used. The most conservative projections are that oil production will

increase 50 percent, to 1.45 MMBO per day. The MMS Gulf of Mexico Region projects an

increase in oil production from 0.9 MMBO per day in 1995 to as much as 1.7-1.9 MMBO per

day in 2000 and projects that gas production will remain fairly steady or increase from 13.9 Bcf

per day to as much as 17.2 Bcf per day. A large portion of this additional production will be

derived from new deepwater fields. Less dramatic, but still sizeable, contributions will be

obtained from the development of the newly discovered subsalt plays. 

During the period 1991-1995, the total number of deepwater fields with proven reserves

increased more than 50 percent, from 13 to 20 fields. The MMS projects that the number of

proved fields will grow another 80 percent by the year 2000 to 36 fields. In 1995, proved

reserves in deepwater OCS fields under the Gulf of Mexico were estimated to be 1.131 billion

barrels of oil (BBO) and 4.6 trillion cubic feet (Tcf) of gas. Recent projections indicate that by

the year 2000 proved reserves of deepwater oil will more than double to 2.467 BBO and gas

reserves will increase nearly 80 percent to 8.2 Tcf.

Technology

The 1,000-foot (305-meter) water depth barrier for installation of production platforms was broken

in 1976 when Shell installed the Cognac platform in 1,025 feet of water (see Figure 3). This record

was broken in 1989 by Shell’s Bullwinkle platform at 1,353 feet and Conoco’s Jolliet 
12

platform, the first tension leg platform (TLP) in the Gulf, at 1,720 feet. Jolliet held the record

until Auger was installed in 2,860 feet of water in 1994. Shell’s Mars platform, located in 2,940

feet of water, assumed the current deepwater production record when it was installed in 1996.

Industry is rapidly advancing operations into deepwater (Appendix 2). Shell Offshore has

announced its Ram-Powell prospect slotted for installation in 3,255-feet water depth with

production start-up projected for 1997. Texaco’s Gemini prospect in 3,393 feet of water is

projected for production start-up in 2000. In even deeper water, production is planned for Shell’s

Ursa prospect at 4,021 feet, Texaco's Fuji prospect at 4,243 feet, Exxon’s Diana at 4,657 feet,

Shell’s Mensa prospect at 5,376 feet, and Amoco’s Kings Peak prospect at 6,530 feet. In 1996,

the Baja well was drilled by Shell in approximately 7,600 feet of water. 

In the future, even greater water depths will be tackled by industry. By the early 2,000's,

exploration wells may be drilled at 10,000-foot depths, at the very limits of the Exclusive

Economic Zone, and production systems will be designed for depths of 6,000 feet and greater.

The product pipeline networks for gas and oil will have been extended well off the continental

shelf and down the continental slope. Large reservoirs will be serviced by tension leg platforms

or SPAR platform derivatives with extended capability to handle distant subsea completions.

These facilities will likely be operated by consortia of major oil companies. Smaller deepwater

reservoirs will be produced by independent oil companies utilizing small moored floating

platforms, many of which will be capable of reuse in other locations. The business climate will

demand innovative platform configurations, reductions in the weight and cost of risers and

mooring systems and solutions to the pipeline reliability problems.

In water depths exceeding 1,000 feet, the use of conventional, bottom-founded (fixed) platform

design quickly becomes uneconomic. As new discoveries are made in deeper and deeper water,

the innovative technologies used by industry to design and build deep-ocean compliant structures

continue to evolve to meet technical and economic needs for deepwater development.

Nonconventional production platforms, such as tension leg platforms, spars, and subsea

completions (see Figure 4), are being utilized and new designs are constantly being researched

and evaluated. This rapid evolution in technology needs to be independently verified to ensure

continued safety of operations and protection of the environment. Within MMS, technical

personnel review operational problems and consider possible technological solutions, which may

be better defined through research efforts. The Technology Assessment and Research Program

(TARP) of MMS funds research projects to provide a continuing and comprehensive technology

base within the MMS to ensure that OCS operations are orderly, safe, and pollution-free, and to

ensure that MMS regulatory requirements facilitate the use of advanced technologies.

Many deepwater platforms, pipelines, and subsea completion projects are currently under

construction or awaiting start of construction, under design or planning, or under study (see Table

5). These newer designs have not only fostered the progression into deeper waters, but they have

reduced overall construction and installation costs. Perhaps more importantly, they have reduced

the cycle time from discovery to first production. Oryx/CNG’s Neptune spar platform, the first

of several spars already on order, realized significantly lower construction costs. With the

transition from the “Auger” design to the “Mars” design, Shell cut the construction period to nine

months, at a savings of $120 million. Since 1989, most of the deepwater development designs

have involved the use of subsea completions connected to shallower-water fixed facilities or

some variant of traditional production systems. Other options for handling and transporting

deepwater production are also being explored, including deepwater “host” processing facilities,
13

multiphase pipelines, and tankering operations. The technology for installation of pipelines in

deep waters has kept pace with the evolving technology for deepwater drilling and production

systems. Between 1993 and 1995, the number of pipeline right-of-way and installation

applications increased by more than 20 percent (see Figure 5). In 1996, a record number of

pipeline miles was approved and installed. Many of the recently proposed pipelines are

significantly longer than most pipelines installed in the past. 
14

Figure 4 Deepwater Development Systems in the Gulf of Mexico (graphic)
Figure 5. Gulf of Mexico Pipelines Approved 

(1992-1996)

Pipeline Miles (Y1) Pipeline Segments (Y2)

Year

1992 1993 1994 1995 1996

0

200

400

600

800

1000

1200

1400

1600

0

50

100

150

200

250

300

350

15

Table 5. Announced Gulf of Mexico Projects by Water Depth

Water Depth Under Design/Planning

(approx. meters) Construction/ Phase Under Study Total

Awaiting Start

0-100 9 11 4 72 153 5 

100 - 200 19 6 1 44 136 0 5 6 3 13 20 6

200 - 300 3 1 0 5 13 3 4 7 3 7 13 5

300+ 3 0 2 0 6 0 1 33 34 3 53 47

PLA PIP PLA PIP PLA PIP SUB PLA PIP SUB

SUB SUB 

 2 3 3 0 17 10

TOTAL 27 10 6 19 57 44 95 239 63 49 172 13

PLA = Platforms PIP = Pipelines SUB = Subsea completions 

Source: Gulf of Mexico Field Development Report, January 1997, Offshore Data Services.
16
17

Impact of Deepwater Activities on the MMS

Over time, the MMS Offshore Program has become increasingly complex. New issues, new laws

and regulations, and new and expanding operations from deepwater exploration, discovery, and

production have intensified the demands on the MMS. These have impacted many different parts

of the MMS, but the greatest impact is on the Gulf of Mexico OCS Regional office--both in terms

of workload and of expertise. Much of MMS’s expertise has evolved around regulating the more

traditional shelf-based oil and gas operations. Deepwater operations differ from those conducted

in the shallower waters of the Gulf in that they

may be significantly more remote. Most deepwater developments are located

more than 100 miles from shore; some are as far as 200 miles. Many of these

facilities will be beyond a 2-hour helicopter flight, and these larger, more

complex facilities will require more detailed inspections and longer inspection

times. The Auger platform is 172 miles from the Lafayette heliport and the

Mensa project will be 120 miles from New Orleans. The Baja exploratory well

was more than 150 miles from shore and required a special contract helicopter

to transport MMS drilling inspectors to the site;

may be subject to substantially different environmental conditions. Bottom

conditions and associated benthic communities in these areas are relatively

unknown. Additional environmental studies will be required, developing

informed and comprehensive environmental assessments will be more difficult,

and new mitigation measures may need to be developed. Pipelines for

deepwater developments will be substantially longer, possibly encountering

various habitats and geologic hazards, thus complicating the safety, technical,

and environmental analyses and environmental protection associated with

these projects; 

may be technologically more sophisticated. The challenges of deepwater

exploration and development have promoted the development of new

technologies. New drilling vessels, production systems, and nonconventional

production platforms are being used. Many developments will use subsea

completions with computerized remote control systems;

may produce at much higher rates. One of the features of deepwater

discoveries that have made them so attractive is the high individual well rates.

The record for sustained rate from an individual well is 13,000 barrels of oil

per day (BOPD) by a well on Shell’s Platform Auger, but even higher rates

have been already reached on a temporary basis (15,000 BOPD) at the Mars

facility. Only a few years ago the Gulf had only a few wells that produced at

a rate of 5,000 barrels a day or greater. Loss of control of such a well presents

proportionately greater potential impacts to the environment than would a less

remote, lesser-rate well;

are typically subject to different economic determinants. The MMS will need

to conduct increasingly sophisticated analyses on both the primary and

associated nearby reservoirs tapped by deepwater development to ensure that

smaller, but still economic, reservoirs are developed. If larger fields are

developed and the facilities removed, then development of smaller nearby

fields may be delayed or may not occur.
18

Deepwater operations present many challenges including identifying risk and incorporating that

risk into permitting decisions. Another challenge will be evaluating and mitigating potential

adverse environmental impacts. The MMS is working diligently to keep pace with evolving

deepwater issues and technical expertise, and is continuously developing the regulatory

framework required to manage risk effectively. These efforts will allow the MMS to be an

effective manager and regulator of these deepwater areas. On regulatory issues, the MMS has

formed an internal Deepwater Workgroup in 1992 composed of Regional and

Headquarters staff to address technical issues and regulatory concerns relating

to deepwater operations. As a result of this team’s efforts, new regulatory

requirements have been developed for the submittal of Deepwater Operations

Plans (DWOP) for operations in greater than 1,000 feet (305 meters) of water

and for all projects using subsea completion technology (Notice to Lessees

(NTL) 96-4N). The DWOP is intended to provide the MMS with the

information needed to evaluate the new deepwater operations and reduce

industry apprehensions by giving the MMS an early enough look to highlight

significant concerns before investments are made;

participated in the industry-led DeepStar project. The Gulf of Mexico Region

continues to work with DeepStar to stay current with the rapidly evolving

technology used in deepwater development and production, and to identify and

address regulatory issues in advance or permitting decisions;

performed extensive regulatory and technical review for subsea completion

technology;

issued NTL 96-6N (effective October 1, 1996) on submittal of Conservation

Information (reservoir and geologic) for deepwater or subsea development

projects; and

begun developing a new NTL to address concerns on production within 500

feet (150 meters) of lease lines and on regulating high-volume horizontal wells

for all OCS leases.

Although the full impact on the Region is not known because new technologies are being

developed and applied in the field, and new issues are expected to arise, some specific impacts

are emerging and others can be anticipated.

Leasing Activities

Geological and Geophysical Permitting

With the implementation of deepwater royalty relief and the record-breaking number of bids at

the 1996 Gulf of Mexico lease sales, the geophysical companies have committed to large

speculative 2D and 3D geophysical surveys in deepwater areas. The MMS is working to keep

abreast of the new developments in deepwater seismic surveying technologies. The number of

Geological and Geophysical Permits has been consistently high over the last five years (see Table

6) and the number of permit applications is expected to increase. Current surveys are

incorporating denser grids with more line-miles of data, are covering larger areas, and are moving

out into progressively deeper water. The workload involved in the review and issuance of these

permits is increasing. In the coming years, MMS will acquire these much needed modern data

sets, which are necessary for fair market valve determinations and for reserves and resource

analyses of deepwater fields.
19

Table 6. Geological and Geophysical Exploration Permits

 in the Gulf of Mexico 1992-1996

Calendar GULF OF MEXICO OCS

Year

LOUISIANA TEXAS MAFLA1 TOTAL

1992 103 (46) 27 (5) 4 (2) 134 (53)

1993 102 (56) 29 (11) 4 (1) 135 (68)

1994 91 (36) 41 (17) 3 135 (53)

1995 78 (35) 27 (12) 0 105 (47)

1996 94 (40) 36 (13) 1 (1) 131 (54)

Total 468 (213) 160 (58) 12 (4) 640 (275)

 Mississippi, Alabama, and Florida 1

 (Numbers in parenthesis indicate permits issued for 3-D seismic exploration as part of total permits issued.)

Resource Estimates and Exploration/Development Projections

Prior to each lease sale, the Gulf Region's Office of Resource Evaluation develops resource

estimates and projects exploration and development (E&D) activities associated with both the

proposed lease sale and the OCS Program in the Gulf of Mexico. Theses estimates and

projections use the most recent National Assessment as a starting point, and then make

projections based on MMS geological, geophysical, and engineering analyses, on statistical

analysis of past OCS activities and production, and on economic information and projections.

Because the majority of the impact producing factors assessed in the E&D have historically

occurred in shallow water, it has become necessary to assess new technologies and techniques

for exploration, development, and production. The E&D projections must incorporate new

development scenarios, more extreme environmental factors, new deepwater plays, different

reservoir characteristics (including significantly higher production rates), higher facility and

operational costs, and different economic factors (for example, the Deep Water Royalty Relief

Act). The need for ongoing analysis of emerging deepwater trends and technologies will

continue to grow.

Environmental Studies

The Environmental Studies Program (ESP) is responsible for providing the research and

environmental information necessary for decisionmakers to make informed decisions on OCS

activities. 
20

The MMS environmental studies are designed to address specific issues relating to the

environmental and socioeconomic health of the region, both before and after OCS leasing. Since

most MMS-funded studies have been done on the continental shelf out to 1,000 feet of water, the

ESP will be heavily affected as new information needs are identified. In response to the need to

identify the implications of deepwater activities quickly, the MMS is sponsoring a Deepwater

Workshop in April 1997 to pull together experts who will attempt to identify and prioritize the

most critical technical and environmental data needs to aid deliberations for both project and

manpower planning, and budget purposes. Significant biological and physical indices must be

identified and monitored. Baseline or reconnaissance studies are also needed.

Since the mid-1980's, studies of the deep-sea in general, and chemosynthetic communities and

marine mammals in particular, have been funded and completed. Toward the end of the initial

Gulf deep-sea research program, chemosynthetic communities were discovered in the Gulf in

water depths from about 500 to 1,000 meters (1,640 to 3,281 feet). Subsequent specialized

studies were conducted on chemosynthetic ecosystems at selected sites to determine the

distribution, abundance, function, productivity, and vulnerability of these communities.

Restrictions on OCS operations were developed to protect these sensitive communities and a

Notice to Lessees and Operators (NTL 88-11) was issued in 1988. Additional follow-up

chemosynthetic community studies are needed, and are planned, to determine the rate of change

in these communities. In addition, studies on the distribution and abundance of marine mammals

in the Gulf of Mexico, particularly in deepwater, are ongoing. 

Onshore facilities and infrastructure to support deepwater activities may have widespread effects

on Gulf coast socioeconomic conditions. The study “A Socioeconomic Analysis of Port

Expansion at Port Fourchon” was just awarded to document the growth of OCS-support activities

in the Port Fourchon, Louisiana area. This study will also develop a model of the economy of

the area that will allow the projection of future economic effects of OCS activities. Other studies

on these potential impacts, and on the potential impacts to water quality, air quality, and

wetlands, are in the planning stages. 

As OCS operations move into deeper waters, the ultimate fate of deepwater structures is being

studied. Below some water depth, the amount of fishes associated with offshore platforms may

decrease to a negligible amount. There are limited data regarding this critical water depth, which

could be an important consideration for abandonment options. Information about the possible

limitation to the artificial reef effect and the distribution patterns of fishes is needed to effectively

manage and regulate facility abandonment at deepwater sites.

Headquarters environmental staff are involved in these new research areas and priorities, because

all such initiatives must be managed in the larger context to ensure full coordination and the

broader perspective. A change in both short-term and long-term research schedules also must be

budgeted for, not an easy task in today’s competitive climate. The administrative load of more

research projects, new issues, and shifting priorities will have a noticeable impact on the ESP

staff loads in the coming years.

Lease Sale Environmental Impact Statements

A comprehensive Environmental Impact Statement (EIS) is prepared for each Gulf of Mexico

OCS lease sale. The EIS analyzes both the potential impacts of the proposed lease sale and the

comprehensive impacts of the OCS Program. As MMS projected a dramatic move toward

development in deepwater, major revisions were made in the focus and scenario of the lease sale
21

EIS’s to account for the differences inherent in deepwater operations as compared with operations

on the shelf. 

Due to the technological changes associated with deepwater exploration and development

activities and the associated transportation schemes, additional resources will need to be allocated

to deepwater scenario development and analysis for use in lease sale EIS’s. Various exploration,

development, production, and transportation options must be considered and potential impacts

resulting from each option evaluated. New and evolving technologies, longer and larger diameter

pipelines with additional associated landfalls, increased production rates, and possible new

abandonment and site clearance procedures must be incorporated into the EIS scenario.

Projections of these factors and the potential associated impacts must be fully addressed in the

EIS. New environmental resources may be discovered in deepwater areas, and any potential

impacts to these resources from OCS activities would need to be analyzed. Development of

mitigation measures for new and different potential impacts from deepwater operations is an

ongoing process. Monitoring mitigation compliance and effectiveness is becoming an

increasingly important and resource-demanding part of the Gulf Region's mission. 

The MMS is conducting extensive scoping to identify alternatives to the proposed lease sales, for

issues associated with deepwater activities, and for possible mitigation for potential impacts

associated with deepwater activities. The alternatives, issues, and mitigating measures identified

will be addressed in lease sale EIS’s. Socioeconomic impacts to the coastal zone from

expanding and deepening ports facilities have already been identified as a significant issue

associated with deepwater development. Significantly increased efforts will be needed to fully

understand and evaluate these impacts. 

Lease Administration and Adjudication

Administrative workloads in lease administration are expected to escalate over the next several

years due to the upsurge in deepwater activities, the overall expansion of industry activity in the

Gulf, and the increasing size of Gulf of Mexico lease sales (see Table 4). Once leases are listed,

records related to the assignment of record title interest, operating rights, mortgages, and

production status must be maintained for the life of the lease. Management of official lease files

and associated documents will require more time and greater automation. The number of

nonrequired filings is also expected to rise. The expanding number of operators and an active

assignment market have resulted in an ever-increasing adjudicative workload in the Gulf of

Mexico OCS Region. Management of the supplemental bonding program may become more

complex with the growth in deepwater leasing and development. 

Bid Evaluation

Detailed evaluation of individual tracts must be made to determine the potential fair market value

of the tract for bid evaluation purposes. Prior to and immediately following a lease sale, the

MMS identifies seismic data needed to evaluate bids on specific tracts. With industry’s migration

into the deeper water areas of the Gulf, bids are being received in areas where there is insufficient

information for tract evaluation. Most of the deepwater areas where there is active industry

interest are newly surveyed or are currently being surveyed. Regulations allow the MMS to

acquire copies of this geophysical data for the cost of reproduction. A vast amount of data is

expected to be needed to support of deepwater bid evaluation. A total 15,108 line-miles of 2D

seismic data and 1,424 blocks of 3D seismic data was acquired to support the bid evaluation for

Central Gulf Lease Sale 157 held in April 1996.
22

Previously, the high costs and risks associated with exploration and development of any single

tract in water depths greater than 3,000 feet generally resulted in the determination that the tract

had nominal fair market value. With deepwater royalty relief, the water depth range of

economically viable tracts has shifted to deeper waters, adding many more tracts to the full bid

evaluation workload. Many marginal prospects will become economically viable under royalty

relief. To evaluate a tract that will obtain royalty relief on a unit or field basis, the evaluation

must encompass the entire potential unit or field. These evaluations will usually encompass four

to six tracts for every tract previously evaluated, greatly increasing the workload of the Region.

Reserves and Resource Evaluation

Reserves and resource estimates derived from geologic and engineering studies are used by many

offices and sections within the Region. The type of evaluation for the vast majority of deepwater

fields has been from the interpretation of conventional 2D seismic survey data and well data. The

MMS will need to reevaluate these deepwater fields using state-of-the-art 3D seismic survey data

to improve the interpretations and field analyses. The Gulf Region is in the initial stages of this

evaluation. The advent of each new tool or method generates new ideas in the search for

hydrocarbons. Computers can process raw geophysical and geological data at speeds that ten

years ago would have been impossible to do in a lifetime. Computer evaluation of 3D seismic

data has enabled the creation of three-dimensional subsurface interpretations. It is now possible

to evaluate the configurations of subsurface horizons on a grid of a few feet instead of the

conventional mile-by-mile grid of data. Analysis of actual seismic reflector characteristics can

now be performed to estimate the thickness and geographic extent of reservoir rock and its fluid

content. The increase in the detail of interpretations has led to the discovery of many

hydrocarbon pools, discoveries that would not have been possible a few years ago. Armed with

these new tools, explorationists can identify potential reservoirs in progressively deeper waters.

 Each advance in technology also requires continual training of MMS geologists, geophysicists,

and engineers to keep abreast of the latest methods.

There are about 33,000 boreholes in the Gulf of Mexico. Some of the existing well data are

unreliable and the process for correcting the well data is labor-intensive and difficult. Currently,

MMS personnel make programmatic decisions based on well data that is a combination of hard

copy records and historical data that resides in the TIMS database. Analyses made on the basis

of questionable data can result in erroneous resource and reserve estimates, which can lead to

later errors in decisions on fair market value and royalty relief. Over the next two years, the Gulf

Region will systematically research and verify all historical well data and make the changes to

the database.

The recent expansion in the size of the Gulf of Mexico lease sales has increased the regional

mapping workload related to these sales. A comprehensive evaluation of the existing deepwater

discoveries will need to be done on a field-wide basis, rather than on a single-block basis. Leases

with new discoveries and the adjoining blocks need to be studied to determine both reserve and

resource potential. These analyses will require a complete understanding and explanation of the

field structure, stratigraphic setting, and boundaries. Evaluation of deepwater fields will require

detailed geological, geophysical, and reservoir engineering analyses of about 800 additional

blocks. 

Deepwater field analyses provide analogs for fair market value determinations and will be used

to evaluate whether leases meet the criteria for royalty relief established by the Deep Water

Royalty Relief Act. Royalty relief evaluations will involve the modeling of digital geophysical
23

data submitted with applications, conducting completeness reviews, running, verifying the

acceptability of the engineering model inputs, and evaluating economic information submitted

in connection with the Act.

Exploration, Development, and Production Activities

Exploration and Development Plans

Deepwater development is expected to increase the number of Exploration Plans (EP's),

Supplemental EP's, and Development Operations Coordination Documents (DOCD's) submittals,

and the workload involved in the review and analysis of these plans. Facilities proposed in these

plans may be more complex and could incorporate new and unusual technologies. In addition,

deepwater oil fields tend to have higher sulfur content. High-sulfur operations may require

additional technical, safety, and environmental review. More than 400 deepwater leases will

expire by the year 2000 unless they are drilled, unitized, or granted suspensions of operations.

 These pending expirations are anticipated to stimulate activity in the next four years.

The more complex and larger proposals for deepwater operations will require more extensive

environmental reviews. By 1998, the number of environmental assessments and categorical

exclusion reviews conducted by the Region could increase by as much as 50 percent and 30

percent, respectively. To a lesser extent, increases may also be anticipated in the numbers of oil

spill response plan, archaeological, air quality, chemosynthetic community, and live bottom

reviews conducted over the next several years. An Environmental Assessment (EA) must be

prepared for any proposal involving the use of new and unusual technology. Environmental

reviews must include multiple anchor sites as well as the structure's surface location, wider

anchoring spreads, new and unusual technologies, and extensive oil-spill analyses.

Chemosynthetic community surveys and reviews are required in water depths greater than 400

meters (1,312 feet). Impacts to endangered, threatened, and/or protected species may become

an issue as development moves into deeper waters. Extended or large-volume flaring and oil or

condensate burning associated with deepwater well testing will require full evaluation of impacts

to air quality. Currently, environmental reviews are done for individual proposals, each of which

may have little to no associated air emissions or water discharges. Projected centralized “host”

production facilities will concentrate the air emissions and water discharges of several satellite

completions at one location. Large production rates and volumes will also complicate

environmental analyses. 

Pipelines

Pipeline installation applications are anticipated to increase in numbers, as well as complexity.

Additional production from more active leases and the fact that the pipeline infrastructure in

many areas of the Gulf is at or near capacity will stimulate expansion of the pipeline system.

Aging existing pipelines may require replacement pipelines to be installed to service both

deepwater and shallow-water facilities. Many of the deepwater fields are located in areas where

there is no existing pipeline infrastructure, so development will require new pipelines to shore.

In addition, if the oil characteristics of new fields are incompatible with the oil in the existing

pipeline systems or with separation/treatment facilities, new pipeline systems to shore will have

to be installed. Deepwater pipelines will be longer and may require new technology for

pipelaying and for transmission of the well production. In some cases, new technologies will

require review for alternative compliance with OCS regulations. These longer pipelines have a

greater potential of impacting environmental resources (e.g., prehistoric and historic
24

archaeological resources, chemosynthetic communities, and topographic features). Longer

pipelines may encounter more geologic hazards or ordnance disposal areas, which may require

special safety systems or span analyses. The formation of hydrates and paraffins will be of

concern because of the colder temperatures encountered at the seafloor in deepwater and may

create the need for review and approval of additional injection systems or for insulated pipelines.

Larger pipelines will require more complex oil-spill contingency plan reviews. New landfalls

could add to impacts to coastal wetlands and habitats; each pipeline to shore will require a sitespecific EA to address these issues. Any pipelines carrying oil or gas with high sulphur content

may require additional technical, safety, and environmental review, and may require special

mitigation. Many new pipelines servicing deepwater development have already been built and

others are being proposed (see Figure 6). 

Technical Review

Rapidly evolving and developing technical capabilities have enabled operations to move into

deeper water. A number of technical considerations and concerns have been raised regarding

deepwater development projects. For the MMS to be effective in its review and evaluation of

deepwater operations, frequent meetings with operators, service vendors, and research entities

are necessary to understand the technological developments.

Because operations and equipment used in deepwater are different from those used in shallower

waters, the existing regulations, originally written for conventional, shallow-water operations,

cannot be directly applied to proposed deepwater operations in many cases. For example, current

regulations do not address the extended testing period that is often requested for deepwater wells.

Safety device location, operation, and testing are fundamentally different for subsea completions

that will be used in deepwater areas. Abandonment and site clearance procedures are expected

to be significantly different for deepwater structures. Further, there is currently no review and

approval process for transporting production by means other than by pipeline. As a result, the

MMS has been granting variances from the regulations, as well as requiring adherence to new

mitigation and safety measures unique to deepwater operations.

Requiring the submittal of a Deepwater Operations Plan (DWOP) (Notice to Lessees [NTL]

96-4N) was established to address the different functional requirements of equipment in

deepwater, particularly the safety system requirements associated with subsea development

systems, and the complexities and unique types of fixed and floating production facilities. The

DWOP allows the MMS and industry to identify very early in the plan review process any

potential issues specific to deepwater operations. The plans provide a mechanism for the

coordination of permitting responsibilities within the MMS and also provide a mechanism for the

consistent application of policies and regulations. Another reason for the DWOP is that

deepwater technology is evolving faster than MMS's ability to revise OCS Operating Regulations.

The NTL process is flexible enough to keep pace with the expanding activities and technology.

Currently, 27 existing regulations have been identified by the MMS and industry as requiring a

departure or alternative compliance approval to permit development operations to proceed (see

Table 7). For the MMS to grant alternative compliance approvals, the operator must demonstrate

an equivalent or improved degree of safety. A departure can be granted when necessary if the

operator can demonstrate that an acceptable level of safety exists. The MMS safety, technical,

and engineering review of departure requests can be complex, involving risk assessment and a

review of hazards analyses conducted by the operator. Requests for departure or alternative

compliance are occurring more often as operations move into even deeper waters and the use of

new technologies is proposed. 
25

Figure 6. Major New Deepwater Oil and Gas Pipelines 1995-1996 (map)
26

 Table 7. Typical Departures/Alternative Compliance for Deepwater Projects

MMS Regulation Departure/Alternative Compliance

250.51(h) Emergency shut down station installed near the driller’s console.

250.57(e)(3) BOP equipment testing interval

250.87(c) Casing annuli monitoring requirement

250.87(d) Pressure rating of tree, wellhead, and related equipment (SITP vs. SCSSV operating

pressure)

250.107(d) Pressure rating of tree, wellhead, and related equipment

250.112(I) Permanent abandonment of wells - clearance of location

250.113 - Temporary abandonment of wells

250.121(e)(4) - SCSSV installation, maintenance, and testing requirements

250.121(I) - Closure of SCSSV in response to ESD (and fire detection system activation

requirements)

250.122(b) Subsea flowline FSV requirements (ref: API RP 14C A1.2(b)(2) and Figure A.1.2)

250.122(d) USV installation, maintenance, and test requirements

250.123(b)(2)(I) PSHL set point requirements (for subsea pressure sensors)

250.123(b)(2)(ii) Flowline and valve working pressure requirements

250.123(b)(4)(ii) USV and SCSSV closure time requirements

250.123(b)(11) Erosion control program requirements

250.124(a)(1)(I) SCSSV function and leak test (interval and criteria)

250.124(a)(3)(I) PSHL device test requirements (interval for subsea pressure sensors)

250.124(a)(3)(iii) SDV operations test requirement (interval)

250.124(a)(4) USV leak test requirements (interval and criteria)

250.124(a)(5) Subsea FSV leak test requirements (interval and criteria)

250.124(a)(10) ESD operation test requirements (interval and USV/SCSSV closure)

250.126 Safety and Pollution Prevention equipment quality assurance requirements

250.152(a) DOI pipelines internal design pressure calculation (e.g., use external pressure)

250.152(b) Pipeline valves, flanges and fitting requirements (e.g., cold temperature effects)

250.154(b)(6) Subsea tie-in FSV requirements

250.156(a)(1) Abandonment requirements for DOI pipelines

250.174 Bottomhole pressure survey requirements
27

The MMS's Technology Assessment and Research Program (TARP) promotes safety of

operations and prevention of oil spills and air pollution through the use of Best Available and

Safest Technologies (BAST). The Program's objectives are to provide a continuing and

comprehensive technology base within the MMS to ensure that OCS operations are orderly, safe,

and pollution-free; to ensure that MMS regulatory requirements facilitate the use of advanced

technologies; to provide leadership to industry, through research participation and dialogue at the

engineering level; and to assure compliance with the provisions of OCSLA Section 21(b) that

requires the Best Available and Safest Technologies (BAST). To meet these objectives in

relation to deepwater development, the TARP has funded projects (see Table 8) in the following

areas: (1) fluid/structure interactions; (2) fatigue life and reliability of a wide variety of deepwater

facilities; (3) operational developments relative to pipelines and (4) behavior of oil spilled in

deepwater blowouts and assessment of possible countermeasures. The TARP has been a catalyst

in forming joint industry projects to address critical and emerging problems. 

It is anticipated that the workload and budgetary impact of the anticipated deepwater

development in the Gulf of Mexico on the TARP will be relatively minor. If the research

requirements expand significantly, however, there may be some additional budget resources

required as well as increased TARP staff workload to design and manage needed research

projects.

Unitization

The number of applications for exploratory/development units is expected to increase

significantly as a result of deepwater leasing and activities. In 1992, 11 percent of the unitization

applications received were for deepwater units; in 1996, 84 percent of the applications were for

deepwater units. Proposed deepwater units will likely require lengthier and more involved

evaluations because they are usually larger in size (include more blocks) than shallow-water

units. Units in shallow water commonly range in size from 1 to 4 leases per unit (84% of new

shallow-water units applied for during 1992-1996). More than 50 percent of the deepwater units

applied for during the same period contained 5 or more leases. Two deepwater units are bigger

than 15 leases (a 16-lease unit at 1,200 meters water depth and a 19-lease unit at 1,400 meters

water depth). 

Because of the lag time in the development of technologies to drill in deepwater and the shortage

of rigs capable of drilling in these areas, many deepwater leases will reach the end of their initial

lease term without having been drilled, and so the leases could expire. To extend the term of an

undrilled lease, the lessee may apply for a suspension of operations (SOO), or the lease may be

included within an approved unit where drilling will occur. As there are many restrictions on

granting an SOO, some operators may apply for unitization of an unreasonably large unit.

Drilling on one lease within a unit holds all leases contributing acreage to the unit. Operators may

also propose larger units to justify the high cost of deepwater development. The MMS must

evaluate these larger proposed units in detail to ensure that unitization will meet MMS's goal of

expediting oil and gas exploration and development. It is common for the MMS to include

project-specific restrictions in the unit agreement, such as clauses to drop leases from the unit if

exploratory drilling does not occur in a timely manner.
28

Table 8. Technology Assessment and Research Program

 Contracts and Cooperative Agreements to Support

Deepwater Development 

Project Contractor/Organization Cost

Estimated

Well Control Procedures - research needed to Louisiana State University $280,000 

avoid blowouts in deepwater where drilling

relief wells is extremely difficult

Offshore Composites Engineering & Joint Industry Project (JIP) $20,000 

Application Center - research on increasing with University of Houston

strength and reducing weight in composite

materials

International Workshop on the Use of JIP/ with University of $50,000 

composites in Offshore Operations (see above) Houston

International Workshop on Advanced Materials JIP/Colorado School of $80,000 

Mines

Methods to Control Hydrates for Deepwater JIP/Westport Technology $50,000 

Operations - research related to lower

temperatures and higher pressures found in

deepwater operating environments, which

causes more rapid development of these

undesirable compounds

Control of Paraffins for Deepwater Operations JIP/University of Texas $100,000 

(see above)

Integrity of Deepwater Pipelines - research into JIP/University of Texas $75,000 

welding and other improvements in laying

deepwater pipelines

Deepwater Offshore Technology Research Texas A & M University $50,000 

Center - a test facility to model forces acting on

deepwater structures and pipe lines, as well as a

center to support offshore technology research 

Analysis of Oil Spill Behavior and S.L. Ross Environmental $15,000 

Countermeasures for Subsea Oil Well Blowouts Research Ltd.

Deepwater Royalty Relief

Deepwater royalty relief will create significant new workloads for most offices in the Gulf

Region. There will be the additional workload of handling royalty relief applications and

associated application fees. Each royalty relief request will require review and analysis of blockspecific and/or field-specific bathymetric, geological, and geophysical data and information.

Block-specific bathymetric data will need to be incorporated into the TIMS/GIS database. The

workload associated with MMS field determinations will expand in response to the requirements

of the Deep Water Royalty Relief Act--e.g., earlier delineation of the entire potential field
29

(undrilled leases and unleased acreage, as well as the leases included in the field or unit); greater

utilization of 3D seismic data; and appeals of initial determinations by lessees. Because

deepwater royalty relief has just been implemented, unanticipated problems and issues will

probably occur.

Deepwater royalty relief affects the data management and audit functions within the Royalty

Management Program (RMP). Royalty suspension volumes are a new approach to royalty relief

and minor changes will be required to RMP's automated systems. These changes can be

accommodated within the existing operation and maintenance activities. The Gulf Region and

RMP are working jointly to develop an efficient procedure to monitor production from leases

subject to suspension volumes to ensure that royalty payments commence at the proper time.

Finally, RMP will audit some of the royalty relief applications prior to granting relief. A

complete application currently requires certification by a Certified Public Accountant regarding

the accuracy of historic costs included as a basis for royalty relief. RMP will use these

certifications to evaluate whether an audit is necessary. It's too soon to accurately estimate the

workload associated with these audits.

Conservation

Conservation, which is ensuring that economic reserves are fully developed and produced, is an

increasingly important part of the Region's workload. Industry requests related to conservation

issues include both routine and nonroutine requests (see Table 9). Routine requests require a

minimum amount of effort beyond entry of the data into the Regional database for tracking and

monitoring purposes. Nonroutine requests include those that involve a departure from normal

operating parameters or requests when there is a suspected violation of the regulations.

Nonroutine requests generally require more intensive review. Deepwater conservation reviews

are a new element of MMS regulatory responsibilities that will require extensive studies; they

therefore are treated as nonroutine requests. Greater numbers of both routine and nonroutine

requests are expected from the incremental increase of producing leases and wells in the

deepwater Gulf of Mexico. 

The MMS has developed a new conservation initiative for conventional projects in water depths

greater than or equal to 1,000 feet, and for all subsea completion projects regardless of water

depth. The Gulf Region established requirements for the submission of Conservation Information

through the issuance of NTL 96-6N, effective October 1, 1996. Conservation reviews will be

more complex and economically sensitive in deepwater areas. Because of higher operating costs

in deepwater, operators may be more reluctant to produce smaller oil-bearing strata prior to

production of associated gas caps. In addition, in an attempt to improve cash flow, more

operators are requesting to produce oil-bearing strata and gas caps simultaneously. Downhole

commingling (producing from more than one reservoir in the same completion) may be crucial

to the development of deepwater projects because deepwater fields may be economically

producible only if production from several reservoirs occurs simultaneously. There is a need for

approval of longer well testing durations in deepwater, sometimes 1-2 weeks or even longer, in

order to justify the huge costs of deepwater development. These extended tests result in requests

for larger volumes of gas flaring and burning of liquid hydrocarbons. At the same time, barging

of test liquids becomes problematic in the rough, deepwater seas. The number of bottomhole

pressure survey waiver requests rose dramatically in deeper water, largely due to the frequency

of subsea completions. As the number of such requests increases with deepwater development

and the extent of these requests pushes the existing regulations to their limits, there will be need

for greater scrutiny and more detailed analyses when these requests are reviewed. 
30

Table 9. Routine and Nonroutine Conservation Requests

FY 1992 FY 1993 FY 1994 FY 1995 FY 1996

Routine

Bottomhole Pressure Tests 2,111 1,829 1,435 1,192 1,521

MER Data Entry 1,045 831 777 873 824

Well Potential and Semiannual Tests 23,123 22,660 19,820 14,920 15,140

Total Routine 26,279 25,320 22,032 16,985 17,485

Nonroutine

Bottomhole Pressure Test Waivers 35 31 39 6 32

Gas Cap Production Requests 13 14 21 32 48

Reservoir Reclassification 10 8 2 5 4

Lease Assignment for Supplemental 14 45 55 42 34

Bonding Requests

Deepwater Conservation Reviews 0 0 0 0 9

Sensitive/Downhole Commingling 9 6 8 10 12

Requests

Gas Flaring Requests 215 320 349 344 377

Downhole Commingling Requests 60 107 103 121 123

500 Feet From Lease Line Requests 16 13 15 21 24

Total Nonroutine 372 544 592 581 663

The MMS Gulf Region is establishing two new work activities for deepwater development. First,

all relevant, available data, such as well logs, seismic data, isopach maps, cross sections, etc., will

be reviewed in order to evaluate whether all economically producible reservoirs penetrated are

to be developed and produced. If the MMS identifies producible zones that were not included

in the operator's development plan, the MMS will require the operator to provide justification

as to why these reservoirs are not to be produced. Second, all requests to abandon completions

will also be reviewed to ensure that completions are not prematurely abandoned before all

economically producible reserves are recovered. These reviews were established in response to

the extremely high costs associated with deepwater operations. High operating costs may create

some pressure or incentive for operators to bypass or to abandon smaller, economically

producible reserves in order to move to larger, more profitable reservoirs. 
31

Inspection and Enforcement

The recent deepwater discoveries are 100-200 miles from shore base, and flight times may be as

much as 3-4 hours round trip. (The average distance and flight time to the more than 3,800

platforms operating in the Gulf are approximately 80 miles from shore base and 45-50 minutes

of flight time.) Deepwater facilities will be larger and more complex, taking longer to inspect

than the average shallower water structures. Inspections of deepwater facilities will require more

trips, or overnight stays, to complete. This situation creates a need to bolster the Regional

inspection force and helicopter fleet. Additional training will be required for both inspectors and

engineers on new production systems, new technologies for deepwater drilling and production,

and new procedures for inspections and accident investigations. The number of inspections

conducted by the Region is expected to increase by 20 percent by FY98. 

As more rigs become available for deepwater drilling operations, more of the MMS Districts' time

will be spent reviewing and approving Applications for Permit to Drill and Sundry Notices. More

inspection time will be devoted to inspecting these deepwater drilling and production operations.

Structure Removal and Site Clearance

Structure removal and site clearance for deepwater structures may present additional

environmental concerns and new technological and regulatory challenges. Because of higher

structure removal costs, industry is expected to request approvals for mid-water abandonments,

leaving lower sections of decommissioned structures that have little or no environmental benefits

as artificial reefs. Department of Defense issues, disposal at sea, and liability issues will need to

be addressed.
32
33

Other Workload Factors

The OCS Program in the Gulf of Mexico is thriving--presenting challenges and expanding

workload in all aspects of the activities. During FY95, there were approximately 5,000 active

leases in the Gulf of Mexico Region; in January 1997 this had reached 6,177 active leases; and

by FY98 this number is expected to exceed 8,300 active leases, a 40 percent increase. More

independent companies are becoming active in the offshore Gulf of Mexico; some have little or

no experience with MMS rules and policies. 

The increase in deepwater development and associated complexities in the technical, safety, and

environmental reviews of deepwater exploration and development projects is occurring at a time

when the shelf infrastructure is also undergoing a transition. Existing offshore infrastructure is

also approaching (and in some instances surpassing) its design life, necessitating additional

attention to ensure that operations can be conducted in a safe manner.

Monitoring environmental mitigation, both for operator compliance and for the effectiveness of

the mitigating measures, is an increasingly important part of the MMS mission. Baseline studies

and assessment of environmental impacts are necessary for the MMS to develop effective

mitigation measures. The Oil Pollution Act of 1990 gave the MMS new responsibilities in

overseeing oil-spill prevention and contingency planning. Bonding requirements for offshore

operators were revised, and the MMS is responsible for ensuring legal compliance with the new

requirements. 

Increasing OCS activities require increasing coordination with Federal, State, and local agencies.

The MMS Gulf Region is actively involved in several cooperative efforts with other Federal

agencies. The MMS is cooperating with the Environmental Protection Agency in monitoring

compliance with more restrictive water pollution controls, and MMS inspectors have assumed

new duties in collecting water samples from offshore platforms and performing more visual

inspections for discharged effluents. The Federal Energy Regulatory Commission (FERC) will

use MMS's EA for a pipeline east of the Mississippi delta as the base document for the

preparation of the FERC EIS on the project. The MMS and the Department of Transportation

(DOT) have entered into a Memorandum of Understanding (MOU) ensuring that all producer’s

pipelines are under MMS regulatory jurisdiction and transportation pipelines remain under

DOT’s jurisdiction. This MOU significantly increases the miles of pipelines under MMS’s

jursidiction.

Operations in the Gulf are expanding in directions other than just into deeper waters. There are

a tremendous number of supplemental plans being submitted to drill additional wells from

existing facilities. Many of these supplemental plans are for wells to develop production from

subsalt plays or previously undeveloped shallow reservoirs, horizontal wells, and multi-lateral

wells. Exploration activities and possible development operations in the Eastern Gulf of Mexico

Planning Area will require a comprehensive Environmental Impact Statement to evaluate the

potential impact of OCS operations in this frontier area. Potential sand mining in the Central Gulf

of Mexico is looming on the horizon and will require detailed environmental assessment and new

expertise. Similar activities may occur in the Atlantic Region, which is now under the

jurisdiction of the Gulf of Mexico Regional Office. Alternative transportation of OCS

production, such as tankering, is being considered for operations both in shallow and deepwater

areas. These operations will also require extensive environmental, safety and technical review.

To facilitate oil spill analyses, the Gulf Region is formulating requirements for submitting

information about storage tanks on offshore facilities. Legal challenges and coastal zone

consistency determinations, as well as public education and outreach, will also consume

increasing amounts of staff time.
34
35

Summary

As a result of technological advances that have proven successful in field application, new

discoveries, and the recent passage of the Deep Water Royalty Relief Act, there is renewed

industry interest in Gulf of Mexico deepwater leasing. The challenges of effectively managing

and regulating exploration and development activities in the frontier deepwater areas are in

addition to ever-increasing demands of the OCS Program in the shallower water areas of the Gulf.

The impacts on the workload and demands on the Minerals Management Service, particularly

the Gulf of Mexico OCS Regional Office, as a result of deepwater activities are just beginning.

 Although some specific impacts are emerging and others can be anticipated, the full magnitude

of the impacts is not yet known. Deepwater development will impact all aspects of the MMS

Gulf Region’s Program--from geological and geophysical permitting and prelease environmental

analysis, through conducting lease sales, evaluating exploration and development plans, and

conducting inspections, to decommissioning structures and site clearance. 
36
37

Appendix 1. Deepwater Activity Indicators

Indicator 1992 1993 1994 1995 1996

Prelease Stage

Geological & Geophysical Permits Issued 11 14 11 12 38

Leasing Stage

Lease Sales 

(Central Planning Area/Western Planning Area) 139/141 142/143 147/150 152/155 157/161

Blocks Offered (total blocks/ 9,618/ 10,125/ 10,861/ 10,991/ 5,649/ 

 deepwater blocks) 7,019 7,188 7,507 7,609 5,168

Blocks Bid On (total blocks/ 212/ 358/ 585/ 863/ 1,541/ 

 deepwater blocks) 24 62 69 278 835

% Deepwater Tracts of Tracts Receiving Bids 11% 17% 12% 32% 54%

Leases Awarded (total leases/ 204/ 336/ 560/ 835/ 1,508/

 deepwater leases) 24 60 69 274 822

% Deepwater Tracts of Tracts Leased 12% 18% 12% 33% 55%

Water Depth of Deepest Existing Lease (Year 2,850 m 2,740 m 2,740 m 2,740 m 2,850 m 

End)

Plans and Permit Stage

Exploration Plans (New) Submitted to MMS 13 13 21 20 23

Exploration Plans Approved by MMS 14 12 16 14 22

Development Plans (New) Submitted to MMS 2 3 2 5 4

Development Plans Approved by MMS 2 2 2 5 4
38

Appendix 1. Deepwater Activity Indicators (continued)

Indicator 1992 1993 1994 1995 1996

Applications for Permit to Drill Approved by 39 41 66 85 126

MMS

Drilling Stage

Rigs Drilling - Monthly Average 3 6 11 14 19

Rigs Drilling - Peak Number Drilling 6 9 15 20 26

Simultaneously/Month

Production Stage

Water Depth of Deepest Structure (feet) 1,720 1,720 2,860 2,860 2,940 1

Number of Fields in Production 6 8 12 14 162

Total Production from Deepwater Fields/Year 37.4/ 37.4/ 42.7/ 57.4/ n/a

(MMBO/Bcf) 94.0 133.8 177.8 212.4

Total Number of Designated Fields 61 65 70 76 85

(Active and Expired)

2

Reserves Stage

Total Number of Deepwater Fields 15 15 18 20 25

with Proven Reserves

2

Total Proved Reserves in Deepwater Fields 844/ 813/ 1,132/ 1,132/ 1,370 /

(MMBLS/Tcf) 2.6 2.9 4.1 4.6 4.92

2

2

 1992-93 Conoco's Jolliet TLP in GC 184 1

 1994-95 Shell's Auger TLP in GB 426

 1996 Shell's Mars TLP in MC 807

 As of June 1996 2
39

Appendix 2. Deepwater Production and Discoveries 

Prospect (Partners) Block (feet) Announced Start-up Type (miles)

Name 

Water Estimated Platform/ Distance from

 Operator Area/ Depth Discovery Production System New Orleans

Allegheny Enserch GC254 3,186 FPS 155

(Mobil, 

 Reading &

 Bates)

Amberjack* BP (Shell, MC109 1,029 1989 1991 fixed 102

 Conoco)

Auger* Shell (BP) GB426 2,860 1987 1994 TLP 219

Baldpate Amerada GB260 1,641 1995 1998 compliant 191

Hess tower

Bison Exxon GC166 2,518 149

Boomvang Reading & EB688 3,737 subsea 328

 Bates

Brutus Shell (Exxon) GC158 2,877 1995 152

Bullwinkle* Shell GC62 1,353 1985 1989 fixed 153

Cognac* Shell MC194 1,025 1976 1979 fixed 101

Cooper* Enserch (EP GB388 2,190 1995 FPS 206

 Operating)

Coulomb Shell MC657 7,500 170

Diamond Oryx MC445 2,095 subsea 103

Diana Exxon (BP) EB945 4,400 1991 unknown unknown 356
Appendix 2. Deepwater Production and Discoveries (continued)

Prospect (Partners) Block (feet) Announced Start-up Type (miles)

Name 

Water Estimated Platform/ Distance from

 Operator Area/ Depth Discovery Production System New Orleans

40

Europa BP MC935 3,889 139

Fuji Texaco GC506 4,243 1995 2000 known 178

(Shell)

Gemini Texaco MC292 3,393 1995 2000 unknown 125

 (Chevron)

Genesis Chevron GC205 2,597 1996 1998 spar 153 

 (Exxon, Fina)

Jolliet* Conoco GC184 1,720 1989 TLP 174

King Amoco MC84 5,500 145

Kings Peak Amoco DC133 6,530 2000 153

Lena* Exxon MC281 1,018 1983 guyed 105

tower

Macaroni Shell GB602 3,600 228

Marlin Amoco VK915 3,236 2000 141

Mars* Shell (BP) MC807 2,940 1989 1996 TLP/ 134

subsea

Mensa Shell MC687 5,376 1995 1997 subsea 144

Mickey Exxon (BP) MC211 4,356 1991 unknown unknown 137
Appendix 2. Deepwater Production and Discoveries (continued)

Prospect (Partners) Block (feet) Announced Start-up Type (miles)

Name 

Water Estimated Platform/ Distance from

 Operator Area/ Depth Discovery Production System New Orleans

41

Morpeth British- EW965 1,630 Seastar 134

 Borneo TLP /

subsea

Neptune Oryx VK826 1,930 1997 spar 136

No name Shell MC522 6,950 157

No name Shell MC429 6,274 142

No name BP MC718 2,828 127

No name Chevron GB254 1,920 202

No name Texaco GB269 1,102 268

No name Shell GC69 1,465 147

No name Mobil GC 72 1,655 subsea 147

No name Texaco GC228 1,638 177

No name Shell MC383 5,759 136

No name Conoco GC472 3,817 170

No name BP MC26 1,272 109

No name BP AV575 6,220 179

No name Conoco MC 243 3,100 2000 113

 (Oryx)
Appendix 2. Deepwater Production and Discoveries (continued)

Prospect (Partners) Block (feet) Announced Start-up Type (miles)

Name 

Water Estimated Platform/ Distance from

 Operator Area/ Depth Discovery Production System New Orleans

42

No name BP MC162 3,414 124

No name Enserch MC441 1,520 subsea 101

 (Agip, Fina)

Oyster Marathon EW917 1,200 1996 1997 subsea 131

 (Texaco)

Petronius Texaco VK786 1,754 1995 1999 compliant 146

 (Marathon) tower

Pompano II* BP (Kerr- MC28 1,865 1995 subsea 113

 McGee)

Pompano I* BP (Kerr- VK989 1,290 1991 1994 fixed 109 

 McGee)

Popeye* Shell (CNG, GC116 2,000 1985 1996 subsea 148

 Mobil, BP)

Ram-Powell Shell (Exxon, VK956 3,255 1995 1997 TLP 135

 Amoco)

Rocky* Shell GC110 1,785 1996 1996 subsea 152

Seattle Slew* Tatham EW914 920 1991 1993 subsea 131

Shasta* Texaco GC136 1,040 1994 1995 subsea 178

 (Hardy & 

 Samedan)
Appendix 2. Deepwater Production and Discoveries (continued)

Prospect (Partners) Block (feet) Announced Start-up Type (miles)

Name 

Water Estimated Platform/ Distance from

 Operator Area/ Depth Discovery Production System New Orleans

43

Spend-A- Flextrend GB117 940 1994 1996 subsea 206

Buck* (Mid-Con)

Sunday Silence Tatham EW958 1,450 1994 1998 Truss spar 134

Tahoe II* Shell VK 783 1,500 1984 1996 subsea 138

 (Murphy)

Tahoe* Shell VK783 1,500 1984 1994 subsea 138

 (Murphy)

Troika BP (Shell, GC244 2,721 1994 1998 subsea 159

 Marathon)

Ursa Shell (Exxon, MC809 4,021 1996 1999 TLP 136

 BP, Conoco)

VK 862* Walter VK862 1,043 1995 subsea 116

Zinc* Exxon MC354 1,478 1993 subsea 95

* Indicates prospect currently on production.