Industry interest hits new low in central gulf lease sale

Central Gulf of Mexico Lease Sale 241 drew 148 bids on 128 blocks from 30 companies, with apparent high bids totaling $156 million, the US Bureau of Ocean Energy Management (BOEM) reported following the event held in New Orleans on Mar. 23.

The results are down from last year’s central planning area Lease Sale 235, which received 195 bids on 169 blocks from 42 companies, with a combined $539 million in high bids (OGJ Online, Mar. 18, 2015).

Shell Offshore Inc. led all firms with apparent high bids totaling $24.9 million, including tenders of $7.1 million on Mississippi Canyon Block 767, $7 million on Mississippi Canyon Block 611, and $3.5 million on Green Canyon Block 551.

Bolstered by its $13.2-million offer on Green Canyon Block 475, BHP Billiton Petroleum (Deepwater) Inc. placed second with apparent high bids totaling $18.6 million. The firm submitted just 4 high bids.

Submitting 11 high bids, Chevron USA Inc. placed third at $18.1 million due in large part to its lease-sale-high tender alongside Venari Offshore LLC of $13.7 million on Mississippi Canyon Block 434.

Particularly active was BP Exploration & Production Inc., which tallied 19 apparent high bids with a combined value of $18 million, the largest proportion of which came from an $8-million tender alongside Noble Energy Inc. on Mississippi Canyon Block 518.

Rounding out the top five in sum of high bids was ExxonMobil Corp.’s $10.6 million from 5 offers, including one of $5.2 million on DeSoto Canyon Block 663.

Houston Energy LLP led all firms in number of high bids with 21, but those totaled just $1.5 million. Red Willow Offshore LLC, owned by the Southern Ute Indian Tribe of Southwest Colorado, submitted 19 bids at a combined value of $6.8 million.

Rounding out the top five firms in number of high bids were LLOG Exploration Offshore LLC with 17 totaling $8 million, and Ridgewood Energy Corp. with 16 totaling $8.7 million.

Most bids in Lease Sale 241 were on blocks in more than 2,600 ft of water, and tenders were almost evenly proportioned among available lease terms of 5, 7, and 10 years. At three bids each, Mississippi Canyon Blocks 385 and 518 garnered the most interest.

The auction encompassed 8,349 unleased blocks covering 44.3 million acres. The blocks are 3-230 nautical miles offshore Louisiana, Mississippi, and Alabama in 9-11,115 ft of water.

No bids for eastern lease sale

Also held on Mar. 23, eastern planning area Lease Sale 226 received no bids, the same result as the first eastern gulf sale—No. 225 held in 2014—under the Obama administration's Outer Continental Shelf Oil and Gas Leasing Program for 2012-17 (OGJ Online, Mar. 19, 2014).

“Though the sale did not receive any bids, continued interest in this area is evidenced by ongoing and planned activity on existing leases from past sales as well as from similar activity on existing leases immediately adjacent to this area within the gulf’s central planning area,” BOEM said in a news release.

Lease Sale 226 encompassed 162 whole or partial unleased blocks covering 595,475 acres at least 125 statute miles offshore Louisiana. The blocks are south of eastern Alabama and western Florida in 2,657-10,213 ft of water.

Most of the eastern gulf planning area (EPA) cannot be offered for lease until 2022 as part of the Gulf of Mexico Energy Security Act of 2006.

Lease Sales 241 and 226 are the ninth and 10th offshore auctions under the current 5-Year Program. The first eight offered more than 60 million acres for development and generated more than $3 billion in bid revenues.

Last August’s western planning area Lease Sale 246 drew 33 bids on 33 tracts from just five firms, with high bids totaling $22.6 million (OGJ Online, Aug. 19, 2015).

Unfriendly regulatory regime

“Even though today’s eastern gulf sale was a nonstarter, and the central gulf sale saw the lowest industry interest in the history of such sales, the companies that stepped up and submitted bids demonstrated their commitment to staying in US waters and producing home grown energy, despite a tough operating environment,” commented Randall Luthi, National Ocean Industries Association president. The 148 bids were the lowest for a central gulf sale in 30 years.

“The success of oil and natural gas production in the Gulf of Mexico is the result of decisions made a decade or more ago,” Luthi said. “Efforts to restrict offshore development will have far reaching consequences that will echo long beyond this administration.”

He cited federal statistics indicating that gulf lease sales contributed $80 billion between 2005 and 2014 and US gulf oil output is projected to hit record highs in 2017.

“I find it peculiar that the same federal department that will collect, distribute, and even spend the bonus bids submitted by industry today, took a proposed Atlantic lease sale off the table just last week (OGJ Online Mar. 15, 2016).” Luthi added that the decision helps to keep “nearly 87% of the US outer continental shelf off limits to exploration, as it has been for decades.”

He said, “No other country along the Atlantic basin has so cavalierly closed off such large offshore areas. Canada, Cuba, Mexico, Greenland, Brazil, and Ghana have all recognized the economic and energy security potential off their Atlantic coasts and have active offshore exploration programs.”

Regarding protestors at the site of the sale in the New Orleans Superdome, Luthi remarked that if they “have the opportunity to visit more of the Gulf of Mexico, they will see just how important oil and natural gas is to the residents of the Gulf Coast.”

He said, “The Gulf of Mexico is the source of 20% of our domestic oil and natural gas supply, and this is energy for all of us. While it is everyone’s right to protest, many of the demonstrators could not have been here in New Orleans today without the oil and natural gas produced as a result of the very sales they oppose. It is difficult to overlook the irony.”

Contact Matt Zborowski at

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