The US Bureau of Ocean Energy Management (BOEM) has reduced the rate of the shallow water royalty set for the Gulf of Mexico (GoM) Outer Continental Shelf Lease Sale 249 from 18.75% down to 12.5%. As a result, the royalty applied for new shallow (in water depths less than 200m) oil and gas drilling operations in the Gulf of Mexico will be the same as the federal onshore hydrocarbon royalties lease rate. However, the royalty rate for leases in 200 meters of water and deeper will remain unchanged at 18.75%.
The BOEM changed the rate after considering the decline in US shallow water drilling operations, due to the low crude prices. Oil and gas producers have reduced their exploration activity to cope with the tougher market conditions and shallow water drilling has been particularly affected. The BOEM expects the reduced royalty rate to push for an increase in oil and gas exploration activity.
The upcoming GoM Lease Sale 249 is expected to start in August 2017 and will be the first US offshore sale under the new Outer Continental Shelf Oil and Gas Leasing Program for 2017-2022 (Five Year Program). It will include about 13,725 unleased blocks, in the Western, Central, and Eastern planning areas of the Gulf of Mexico.