In little-noticed news arising out of a recent Gulf of Mexico offshore oil and gas lease held by the U.S. Department of Interior’s Bureau of Ocean Energy Management, the floodgates have opened for Gulf offshore hydraulic fracturing (“fracking”).
With 21.6 million acres auctioned off by the Obama Administration and 433,822 acres receiving bids, some press accounts have declared BP America — of 2010 Gulf of Mexico offshore oil spill infamy — a big winner of the auction. If true, fracking and the oil and gas services companies who perform it like Halliburton, Baker Hughes and Schlumberger came in a close second.
On the day of the sale held at the Superdome in New Orleans, Louisiana, an Associated Press article explained that many of the purchased blocks sit in the Lower Tertiary basin, coined the “final frontier of oil exploration in the Gulf of Mexico” by industry analysts.
“The Lower Tertiary is an ancient layer of the earth’s crust made of dense rock,”explained AP. ”To access the mineral resources trapped within it, hydraulic fracturing activity is projected to grow in the western Gulf of Mexico by more than 10 percent this year, according to Houston-based oilfield services company Baker Hughes Inc., which operates about a third of the world’s offshore fracking rigs.”
Just over a week before the lease, the Mexican government passed energy reform legislation that will prop open the barn door for international oil and gas companies to sign joint ventures with state-owned oil company Pemex, including in Mexico’s portion of the Gulf of Mexico.
Baker Hughes Fracks the Tertiary
The May edition of World Oil explains that Baker Hughes has lead the way in technology innovation to tap into Lower Tertiary oil and gas, described as existing within “harsh HPHT conditions,” or high pressure, high temperature conditions.
Using offshore fracking techniques, Baker Hughes has aided Petrobas in developing a test well in the Cascade offshore field. The company believes the recent Gulf acreage sale by the Obama Administration will serve as a boon for further offshore fracking in the months and years to come.
Fracking as “Next Frontier for Offshore Drilling”
Two weeks before the lease, Bloomberg published an article declaring that fracking could serve as the “next frontier for offshore drilling.” That next frontier will come at a steep cost: $100 million spent per well, according to Bloomberg.
The article further explained that the oil industry at-large, and not just Baker Hughes and its fellow oil services companies, stand to win big from the push to frack the Gulf of Mexico.
“Those expensive drilling projects are a boon for oil service providers such as Halliburton, Baker Hughes Inc. and Superior Energy Services Inc. Schlumberger Ltd., which provides offshore fracking gear for markets outside the U.S. Gulf, also stands to get new work,” Bloomberg reported.
“And producers such as Chevron Corp., Royal Dutch Shell Plc and BP Plc may reap billions of dollars in extra revenue over time as fracking helps boost crude output.”
According to lease statistics made public by BOEM, 42 of the 81 blocks of oil and gas auctioned off on August 20 sit in water depths of over 1600 meters (roughly a mile, or 5,280 feet).
“All of the Above”
A BOEM press release declared the Gulf lease falls under the broad umbrella of President Obama’s “all of the above” energy policy, which critics point to as a form of climate change denial.