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Drilling for Oil off Virginia! (Don’t Hold Your Breath)

Minerals Management Service begins preps for Virginia Lease Sale 220

From the diaries by Erick.

If (and it’s a Big If) President Obama doesn’t reimpose the Presidential Moratorium on exploration of the Federal Outer Continental Shelf, the first new area open for bidding may be offshore Virginia.

Article: Offshore Virginia may finally be ready for drilling

The MMS recently issued a [Call for Information and Interest/Nominations and Notice of Intent to Prepare an Environmental Impact Study (Call/NOI)] for Lease Sale 220. This is a first step in gathering information, evaluation, and public participation for available acreage offshore Virginia. The sale is pending and will take place no earlier than 2011, according to the Mineral Management Service (MMS).

The area covers approximately 2.9 million acres offshore Virginia in the Mid-Atlantic Planning Area located at least 50 miles offshore. According to the MMS, the area could contain up to 130 MMbbl of oil and as much as 1.14 Tcf of natural gas.

The Call/NOI can be found at the MMS website.

While this issue may be contentious, with the potential of political points being scored, the symbolism is a lot more significant than the substance. Here’s why:

Offshore Virginia

  1. *It’s small *– 2.9 million acres sounds like a lot, but oil companies would rather explore a broader expanse, to give themselves a better chance of finding geological formations indicative of good oil & gas prospects. In this context, 2.9 miliion acres is a “postage stamp”.

  2. *It’s in deep water *– current restrictions keep the prospective area 50+ miles offshore. With that, only about 10% of the entire are is in less than 200 meters (660 ft) of water. Two-thirds or more is in 1600 m (5000+ ft), nearly half in 2400 m (7500+ ft). Offshore exploration and development costs increase exponentially with water depth.

  3. It’s remote. While similar water depths have been drilled in other parts of the world, it has been in areas of lower geologic risks, bigger potential fields, and/or existing infrastructure (e.g., the U.S. Gulf of Mexico, Brazil). Off Virginia, there have been no wells drilled. There are no pipelines. There are no onshore processing plants. All this would have to be sited & financed, which means you’d need to find something really large to justify development for production.

  4. Did I mention it’s small? From the standpoint of reserve potential, that is.

The MMS estimates that this area may contain 130 million barrels of oil and 1.14 trillion cubic feet of natural gas.

That would be a large find if it were contained in a single field, maybe enough to justify development. But that number represents the “technically recoverable resource estimate” for the entire area — likely, if it’s there, it’s in numerous, dispersed smaller fields, which would greatly increase the development cost. The MMS figures don’t take economics into account, either.

It would surprise me greatly if the oil and gas majors are anything but indifferent about the availabilty of offshore Virginia for oil and gas leasing. But it would surprise me more if President Obama even lets the issue get that far down the road.

MMS FAQs on Virginia leasing program.

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