W&T Offshore Inc., an independent driller operating in the U.S. Gulf of Mexico, has asked a federal judge to block insurance companies' demands for $250 million in additional collateral for taking apart old oil infrastructure.
The offshore drilling industry faces mounting pressure to provide bonds for decommissioning oil and gas infrastructure in federal waters. The Federal Bureau of Ocean Energy Management (BOEM) in June enforced a final rule that amended its financial assurance regulations in a bid to ensure the industry covers decommissioning costs, not the taxpayer.
The BOEM estimates offshore drillers would collectively pay just under $7 billion as a result in new supplemental financial assurances to cover the potential costs of decommissioning activities.
As of June 2023, more than 2,700 wells and 500 platforms were overdue for decommissioning in the Gulf of Mexico, according to the U.S. Government Accountability Office.
In the lawsuit filed on Dec. 11 in the U.S. District Court for the Southern District of Texas, W&T Offshore asked Judge Keith Ellison to declare that the insurers have colluded to damage the company by jointly demanding additional collateral and premiums.
The company claims the insurers used BOEM's final rule to demand additional collateral for surety, for which the operator has already paid premiums.
Houston-based W&T Offshore did not immediately provide a comment.
Endurance Assurance Corp. and Lexon Insurance Co., both named in the suit, did not immediately respond to requests for comment.
Opponents said BOEM's final rule would disproportionately affect smaller companies that lack investment grade ratings or sufficient proven oil reserves. Oil majors are more likely to have large reserves, or meet credit criteria exempting them from putting up more money to cover potential future decommissioning.
Days before the BOEM's final rule was enforced, Texas, Louisiana and Mississippi sued the government in a bid to block it.
The U.S. Gulf of Mexico produces roughly 1.74 MMbbl/d of oil, according to the last government figures, about 13% of total U.S. output.
Recommended Reading
As Permian Gas Pipelines Quickly Fill, More Buildout Likely—EDA
2024-10-28 - Natural gas volatility remains—typically with prices down, and then down further—but demand is developing rapidly for an expanded energy market, East Daley Analytics says.
Novel EOR Process Could Save Shale from a Dry Future
2024-12-17 - Shale Ingenuity’s SuperEOR, which has been field tested with positive results, looks to remedy the problem of production declines.
Permanent Magnets Emerge as a Game-Changer for ESP Technology
2024-12-19 - In 2024, permanent magnet motors installations have ballooned to 11% of electric submersible pump installations, and that number is growing.
Afterthought to Asset: How Data has Transformed Oil, Gas Decision-Making
2024-12-05 - Digital data points have transformed from a byproduct of operations to the main driver of innovation in the energy industry, says Fabricio Sousa, president of Worley Consulting.
Companies Hop on Digital Twins, AI Trends to Transform Day-to-day Processes
2024-10-23 - A big trend for oil and gas companies is applying AI and digital twin technology into everyday processes, said Kongsberg Digital's Yorinde Lokin-Knegtering at Gastech 2024.
Comments
Add new comment
This conversation is moderated according to Hart Energy community rules. Please read the rules before joining the discussion. If you’re experiencing any technical problems, please contact our customer care team.