Once you leave the Shelf, you’re in Deepwater.  Platform costs rise exponentially with water depth, so there was a practical limit to how tall a fixed platform could be without destroying project economics. Only a couple of fixed platforms were ever installed in over 1,000 feet of water.

 

Deepwater accounts for a big chunk of the 68 million acres of undeveloped leasehold that has the Congressional Democrats’ panties in a wad. This detail of the portion of the deepwater off Texas abuts the Texas Shelf seen in the previous page.

 

Deepwater leases have 10 year primary terms. Historically, the royalty burden was 1/8th (12.5%), which was even waived in some cases in order to encourage development. In 2007, MMS increased deepwater royalties on new leases to 18.75%, the same as new Shelf leases.

 

Many geologists once believed that the Deepwater was a poor place to look for oil and gas, the thinking being that it is so far from the sediment source (the Mississippi River, basically), that the chance of sandstone accumulation was minimal. That theory has been proven wrong by drilling, with Shell’s Great White and Chevron’s Jack discoveries finding pay in the Lower Tertiary, geologically much older than most Shelf production.