The U.S. Bureau of Ocean Energy Management (BOEM) has lowered the royalty rate to 12.5% for shallow-water leases for the proposed Gulf of Mexico (GoM) Sale 249.

The change, which comes after the completion of an analysis of the rates, brings the rate in line with federal onshore oil and gas leases. The new rate is lower than the proposed 18.75% royalty rate that was published in the proposed notice of sale, BOEM said in a news release.

“BOEM has made this decision after careful consideration of market conditions, available resources, leasing, drilling and production trends along with comparable international fiscal systems. In particular, hydrocarbon price conditions and the marginal nature of remaining GoM shelf resources suggest a royalty rate reduction is an appropriate and timely action,” BOEM said. “The shallow water royalty rate reduction targets the GoM shelf where exploration, development and production are in decline and where critical infrastructure already exists.”

The rate change applies only to leases at water depths below 200 m. The rate for greater depths is unchanged at 18.75%. However, BOEM said it is analyzing a price-based royalty system and will engage stakeholders on this concept later this year.

National Ocean Industries Association (NOIA) President Randall Luthi said the change “demonstrates genuine interest in attracting operators to the GoM shelf.”

“Extended low commodity prices and increased regulatory burden over the past few years have rendered exploration in shallow waters nearly extinct,” Luthi said in a statement. “Operators can now calculate a lower royalty rate as they prepare their bids, and we think this will generate more interest in the upcoming sale.”

If BOEM moves forward with the sale, which is scheduled for Aug. 16, royalty rates and other lease terms related to the sale will be formally announced in the Final Notice of Sale at least 30 days prior to the sale date, the release said. The sale is the first under the 2017-2022 Outer Continental Shelf Oil and Gas Leasing Program.

Offshore