Production incentives offered in upcoming MMS Beaufort Sea sale

Petroleum News Alaska Staff

The Minerals Management Service is including incentives in its upcoming Beaufort Sea oil and gas lease sale. Royalties will not be charged on the first 10 million to 45 million barrels of production from leases at the agency’s upcoming Beaufort Sea lease sale (see story page 8), depending on the size of the lease and the distance from infrastructure. The royalty suspensions for Beaufort Sea sale 186 are for oil and condensate — natural gas is not included — and are subject to price thresholds. For a lease size of 770 hectares or less (approximately 1,900 acres) in zone A royalty payments would be suspended for the first 10 million barrels; the royalty suspension is 15 million barrels for zone B, farther from infrastructure.

Zone A includes tracts close to shore — and North Slope infrastructure — from Harrison Bay to Point Thomson. The vast majority of tracts offered in the sale are in zone B.

For leases from 771 to 1,540 hectares (about 1,900 to 3,800 acres), 20 million barrels in zone A would be royalty free, 30 million barrels in zone B.

For leases of 1,541 hectares or larger (more than 3,800 acres), 30 million barrels in zone A would be royalty free, 45 million barrels in zone B.

The royalty suspensions are subject to a price threshold, based on $28 per barrel in 1994 and adjusted for inflation. Royalty on all oil production in a calendar year is due if the average Nymex oil price for that year exceeds the adjusted threshold.

There has been a correction to this article, which will appear in the March 02, 2003 print edition of Petroleum News Alaska. Please visit the following link to view the correction: http://www.petroleumnewsalaska.com/pnarch/001228-70.html