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

Reuters  |  HOUSTON/WASHINGTON 

By and Valerie Volcovici

HOUSTON/(Reuters) - has proposed opening up nearly all of America's offshore waters to and gas drilling, but the industry says it is mainly interested in one part of it, now cordoned off by the Pentagon: the eastern of Mexico.

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

But accessing it would likely require the consent of the

The eastern has been formally off-limits to since 2006 due mainly to the Defense Department's concerns development would interfere with extensive military testing and training exercises in the area.

"The eastern of Mexico could be very attractive to industry because of the proximity to existing infrastructure in the central and western of Mexico," the National Ocean Industries Association, which represents the offshore and gas industry, said in a statement.

"Investing in the eastern could yield results - new jobs, new and gas production and - quicker than investing in other offshore areas."

The American Institute and the Independent Association of have also expressed an interest in the eastern on behalf of its members, and big Plc told in October that "we have appetite and we are interested" in the eastern

Trump's Interior Department has set up an "group" with the Defense Department to negotiate the issue, according to a Defense Department letter seen by

In the letter, sent by to in September, Shanahan says the "supports the development of national domestic in concert with enabling military operations, training and testing."

Defense Department said collaboration with Interior on the issue was "a priority."

offshore producers such as Exxon Mobil Corp, Plc, Anadarko Corp and declined to comment.

Shell welcomed the expanded offshore prospects the plans to make available, but has not committed to any new activity, said

A spokeswoman, Veronica Flores-Paniagua, said the company is happy with Trump's move and wants to continue to explore parts of Gulf, and also to better understand the geology of the Atlantic Seaboard.

WEAK AUCTIONS

Other regions offered in the proposed five-year plan unveiled by Trump's Interior Department last week are unlikely to see much interest, given the ample and relatively cheap opportunities to drill from shale plays on land.

The is remote and expensive, such as have vowed to block drilling, and other areas also harbor deep opposition from politicians, environmental groups and interests worried about spills.

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

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

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

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

"We'd like an opportunity to look at all of the areas (including the and Alaska)," said Tracy Krohn, the of , which currently produces in the of Mexico.

"I don't know that we would exclude any areas."

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

"It would make sense to go out there and run seismic and do some exploratory down the road," said Erik Milito, API's

(Additional reporting by Liz Hampton, Nichola Groom, Timothy Gardner, and Gary McWilliams; Writing by Richard Valdmanis; Editing by and Lisa Shumaker)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, January 08 2018. 17:46 IST
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