bp
Richard Morrison
Regional President
Gulf of Mexico
BP Exploration & Production Inc.
501 Westlake Park Boulevard
Houston, TX 77079

USA
Main + 1-281-366-2000
Fax +1-832-664-6004

August 16, 2017
Ms. Kelly Hammerle
National Program Manager, BOEM
45600 Woodland Road, Mailstop VAM-LD
Sterling, VA 20166
Subject: Request for Information and Comments on the Preparation of the 2019-2024
National Outer Continental Shelf Oil and Gas Leasing Program
Via Federal Rule Making Portal: http://www.regulations.gov. (Docket ID: BOEM-20170050)
Dear Ms. Hammerle:
BP Exploration & Production Inc. (BP) appreciates the opportunity to provide comments
to the U.S. Department of the Interior, Bureau of Ocean Energy Management (BOEM), on
the preparation of a new five-year National Outer Continental Shelf (OCS) Oil and Gas
Leasing Program (Five-Year Plan).
BP supports the initiation of a new Five-Year Plan and welcomes this administration' s
commitment to "enhancing opportunities for energy exploration, leasing and
development of th e OCS." It is clear this administration recognizes the considerable
benefits the U.S. gains from developing th ese energy resources, which include t he jobs
created and supported, the revenues generated for the Federal government and the
states, and the significant contribution to the Nation' s energy supply.
BP also supports the administration's "all-of-the-above" energy plan, which includes
renewables, while recognizing th e key rol e of oil and gas resou rces from t he OCS in
meeting the Nation's energy needs. Although renew ables, togeth er with nuclear and
hydroelectric power, are expected to account for half of the growth in energy supplies
over the next 20 years, fossil fuels are forecasted to rem ain the dominant sources of
energy powering th e world economy, accounting for more than t hree-quarters of total
energy supplies in 2035. By supporting the development of multiple energy sources th e
U.S. ensures th at it ca n with st and energy disru ption s ca used by market f luctuations and
world events.

 Ms. Kelly Hammerle

August 16, 2017
Page 2

We project that the U.S. may become energy self-sufficient in 2023 and maintain its
position as the world's largest liquids and natural gas producer. However, achieving the
administration's "America First Energy Plan" will require increased production, additional
investment and advances in technology. To support this agenda BP believes BOEM
should not only expand access for exploration and production but should also provide
lease and royalty flexibility in consideration of the economic and technological challenges
faced in the OCS. The following comments highlight the opportunities to improve the
current program and support the viability of exploring and developing the OCS' energy
resources.
New Five-Year Plan Should Include Additional OCS Planning Areas

The current five-year leasing plan includes only portions of 4 of the 26 OCS planning
areas. BP strongly urges BOEM to maintain the currently available planning areas in the
new Five-Year Plan and supports opening additional OCS planning areas which show
potential for future exploration and development. As explained by the American
Petroleum Institute and the Alaska Oil and Gas Association, "anything less undermines
the comprehensive process set forth in the OCS Lands Act and could have significant
impacts on U.S. energy policy options well into the future."
BP agrees with BOEM's assessment that "portions of the Atlantic OCS may contain
significant oil and gas resource potential" and fully supports BOEM's initiative to improve
and modernize the current geological and geophysical data set over the area.
Developments in the Atlantic OCS will benefit from the industry's latest advances and
innovations in deep water technology. These technology advancements in real -time and
remote monitoring, subsea infrastructure, directional drilling, and seismic imaging, to
name a few, have resulted in safer, more reliable operations, increased efficiency, and
smaller development foot prints.
The decades of exploring and drilling in the Gulf of Mexico demonstrate compatibility and
synergies can exist between the petroleum industry, tourism and fishing, which are vital
to many coastal communities. For instance, government and state revenues generated
by offshore oil and gas activities support the funding of coastal restoration programs,
opportunities exist to use oil and gas structures for "rigs-to-reefs" which help support
artificial reef planning, and increased activity results in the creation of local jobs and
service industries.
BP strongly encourages BOEM to take the necessary steps to open the Atlantic OCS
planning areas for safe and responsible exploration, development, and production. Given
the vintage and limits of the current geological and geophysical data over the Atlantic
OCS BOEM should allow enough time for the industry to acquire and interpret new
seismic data . BP therefore supports including an Atlantics OCS lease sale in 2020 in the

 Ms. Kelly Hammerle
August 16, 2017
Page 3

new Five-Year Plan. Having a demonstrated commitment by BOEM to allow access to
leases in the region is likely to encourage more industry participation and subscription to
future seismic acquisition programs. This is especially important for the launch of a
successful program in the current low-oil price environment where exploration
opportunities across the globe are competing for limited funding.
For any newly opened areas, consideration should be given to expanding the lease sizes
beyond the standard 5, 760 acres currently utilized in the Gulf of Mexico and reducing the
minimum bid amount to $25/acre, the rate used during the early stages of leasing in the
Gulf of Mexico.
BP continues to support the revenue sharing program implemented under the Gulf of
Mexico Energy Security Act (GOMESA) and believes this would be an appropriate model
for any future OCS planning areas available in the new Five-Year Plan. A revenue sharing
program which shares the developmental benefits, from bonus bids to royalties, with
coastal states that host OCS energy development off their coasts is fundamental to the
success of a long-term OCS leasing and development program.
Lease Terms Should Be Improved
Much of the future development in the Gulf of Mexico will be in deeper, higher pressure,
higher temperature and more complex prospects. In addition, future discovery sizes in
more mature plays in the deep water Gulf of Mexico, such as the Miocene, are likely to
diminish over time. Without relief, this trend creates economic challenges which could
result in fewer of these prospects being developed. Exploration and development
opportunities in newly accessible OCS planning areas will require additional investment in
new data and modern infrastructure. In consideration of the economic and technological
challenges faced in the deep water BOEM should consider providing relief and flexibility
in the royalty rates and the lease terms.
The royalty rates for deep water leases should be rebased to 12.5%, aligning them with
the federal leases onshore and in the shallow waters of the Shelf. In addition, BP strongly
encourages BOEM to use its discretionary authority to create "win-win" royalty relief
structures for marginally economic fields.
Technology development is key to progressing these new resources, and regulations need
to allow reasonable time and space for those developments to progress.
BP
recommends returning to the 10-year primary license terms for all new deep water leases
and granting longer lease extensions when the development of support technology is
necessary to efficiently and commercially produce oil and gas from discovered highpressure/high-temperature fields.

 Ms. Kelly Hammerle
August 16, 2017
Page 4

Future Lease Sales Can Be Improved

BP recommends removing the highly subjective bid adequacy tests and the Restricted
Joint Bidder limitations from the lease sale process. The bid adequacy tests which rely on
probabilistic cash flow simulation models and indeterminate assumptions do not
guarantee receipt of fair market value and result in lost and delayed revenue for the
Federal Government. True competition and market forces are the determining factors of
fair value in an open bid process and should be allowed to work to create an efficient and
transparent leasing program. The antiquated Restricted Joint Bidder limitations have run
their course and paved the way for fair competition in the OCS. However, as natural
partnerships have emerged over time around legacy acreage positions and assets, these
limitations create unnecessary misalignment and barriers amongst long-term partners
who would otherwise be in the best position to jointly explore and develop nearby
prospects. Several companies have already signaled their exit from the deep water Gulf
of Mexico as a result of the current economic challenges which has further limited the
options for companies on the Restricted Joint Bidders list. The time has come to change
these inefficient regulations.
The current 5-year leasing plan calls for up to two lease sales per year covering all the
open planning areas within the Gulf of Mexico (GoM). BP supports BOEM hosting GaMwide lease sales but suggests adjusting the cadence to one lease sale per year preferably
in May. This will significantly improve the efficiency of the process and allow for better
planning and communications, such as providing the Final Notice of Sale at least 60-days
before the bids are due.
BP appreciates BOEM's efforts to solicit stakeholder input to this very important and vital
process to successfully deliver the administration's "America First Energy Plan" and looks
forward to reviewing BOEM's Draft Proposed Program. Thank you for considering these
comments.

/dwr