Exxon, government settle dispute over Gulf leases

[January 09, 2012]  NEW YORK (AP) -- Exxon Mobil Corp. and the Norwegian oil producer Statoil have reached an agreement with the federal government that will allow the companies to continue developing a potentially lucrative oil discovery in the Gulf of Mexico.

The government will get more money from Exxon and Statoil as part of the agreement to settle federal lawsuits over their leases in the oil field known as Julia, which is about 250 miles southwest of New Orleans. The proposed settlement was filed in federal court Friday but still must be approved by a judge.

Exxon spokesman Patrick McGinn said Saturday that the settlement will allow the company to develop the resource as quickly as possible. The initial phase of the project is expected to produce more than 175 million barrels of oil from six wells.

Exxon has estimated that the oil field may hold billions of barrels of oil and gas equivalent but it is remote and technically challenging to develop.

Exxon and Statoil have five leases in the field; three signed in 1998 and two in 2003. Each company owns 50 percent interest in the leases.

The dispute began in October 2008, when Exxon applied to extend the leases but the government refused. It said the company didn't present a specific production plan. Exxon and Statoil sued the government after losing several appeals.

Under the settlement, the two companies will develop their leases in phases as initially planned with the goal of starting initial production by June 2016.

They also will pay more to the government in exchange for the lease extensions. For example, the companies will pay $11.2 million each year until the three original leases reach at least 87.5 million barrels of total production, McGinn said in an emailed statement.

The agreement also raises the royalty rate on those three leases to 18.75 percent from 12.5 percent, he said. Annual rent on those three leases rose to $11 per acre from $7.50 per acre. The royalty rate for the other two leases is 12.5 percent.

If Exxon and Statoil had lost the lawsuit, the leases would have reverted to the government.

[Associated Press]

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