Chris Oynes: MMS looks for filing

After four long years, feds ‘very, very close‚’ to bagging first application to operate an FPSO in the Gulf of Mexico

Ray Tyson

For Petroleum News

The federal agency that oversees oil and gas activities in the U.S. offshore is confident that by year-end it will have its first application to operate an FPSO in the Gulf of Mexico. “I think we are getting very, very close to a potential filing,” said Chris Oynes, Gulf regional director for the Minerals Management Service.

Otherwise known as a floating production, storage and offloading vessel, an FPSO is commonly used where sub-sea pipelines are unavailable to transport produced oil ashore. Instead, shuttle tankers and barges are typically used to move oil from the FPSO to shore. The vessel is permanently moored over a field until the reservoir is depleted and then moves on to another offshore production site.

More than four years have elapsed since MMS approved the use of FPSOs in the Gulf of Mexico. Surprisingly, there have been no takers.

That’s because Industry, as it began searching for oil in deeper waters and farther away from existing pipeline systems, fought long and hard for workable government regulations allowing the operation of FPSOs in the Gulf. The long-awaited MMS decision favoring FPSOs was handed down in January 2002.

It now appears companies with stranded discoveries in deepwater Gulf are finally warming up to the FPSO.

“Several companies have come in and talked to us about the use of FPSOs,” Oynes said in early May at the Offshore Technology Conference in Houston, Texas. “It would not surprise me to have at least one filing in 2006.”

Oynes declined to identify the companies interested in bringing an FPSO to the Gulf. However, explorers with “ultra-deepwater” oil discoveries in such remote areas as Alaminos Canyon and Walker Ridge would have to be considered strong candidates. In fact, many of them have openly discussed FPSOs as a transportation option.

Associated gas handling an issue

Flaring gas into the atmosphere would be the least expensive solution, but long-term flaring is simply not an option. MMS considers flaring to be a wasteful practice.

“They (companies) have heard us loud and clear that that’s not an acceptable way to deal with a reservoir,” Oynes said. “What to do with the gas is probably one reason why people haven’t rushed into FPSOs in the last few years.”

MMS does provide options for associated gas that include transporting the gas ashore via pipeline, converting gas to liquid natural gas or to liquids (gas to liquids), or using it to generate electricity that would be used on or off lease for oil and gas operations.

Additionally, the gas could be injected into a producing oil reservoir to increase oil recovery with the expectation that once the oil was depleted, the recoverable gas would be produced and marketed. Or, the operator could inject gas into a non-producing reservoir with the expectation that prior to lease or field abandonment, the injected gas would be produced and marketed.

MMS options likely would add significantly to project costs. Nevertheless, “what we have seen is that most companies have taken that to heart and therefore have now started to say okay we won’t use an FPSO, unless we have a gas line, or gas-to-liquids, or some other type approach.”

Once an FPSO application is filed with MMS, the review process would take six months to a year and a half, Oynes said. MMS would judge projects on a “case-by-case basis,” according to the regulations. The so-called “Record of Decision” approved by MMS in 2002 simply gives industry the opportunity to submit a plan to use an FPSO for a specific project, and gives MMS the ability to consider this type of development project.

In addition to a Deepwater Operations Plan, a Development Operations and Coordination Document would be required before operating an FPSO in the Gulf of Mexico.