Western Gulf of Mexico lease sale activity continues to dwindle

Results published by the US Bureau of Ocean Energy Management (BOEM) indicate a new low in industry interest for western Gulf of Mexico lease sales. Just three firms submitted 24 bids on 24 blocks in Lease Sale 248 on Aug. 24, BOEM reported from the event in New Orleans. Bids totaled $18 million.

As with last year’s western gulf sale, Australia’s BHP Billiton Petroleum (Deepwater) Inc., a BHP Billiton Ltd. company, was the most active firm, submitting 12 bids totaling just fewer than $10 million. Its highest bid was $1.1 million on Alaminos Canyon Block 127, but most of its bids were in the East Breaks area.

BP PLC subsidiary BP Exploration & Production Inc., the most active firm in the western gulf sale of 2 years ago, accounted for 10 bids in this year’s sale totaling $6.3 million. All of its bids were in the Garden Banks area.

The single highest bid came from ExxonMobil Corp., which targeted East Breaks Block 590 at $1.12 million. The sole US firm to participate in the sale, ExxonMobil placed just two bids overall, both in the East Breaks area, totaling $1.8 million.

Fourteen bids sought 7-year lease terms while the remaining 10 sought 5-year terms. Fourteen bids targeted blocks in 400-800 m of water while the rest targeted those in 800-1,600 m of water.

Drawing the fewest bids and lowest sum of high bids for a western gulf sale since regional sales began in 1983, Lease Sale 248 offered 4,399 tracts covering 23.8 million acres located 9-250 nautical miles offshore in up to 3,340 m of water.

Bids tapering off

BOEM Director Abigail Ross Hopper attributed the light activity in the Aug. 24 sale to “today’s market conditions and industry’s current development strategy.” Randall Luthi, president of the National Ocean Industries Association (NOIA), reiterated the results “are indicative of the current market conditions and regulatory environment.”

In a separate statement released on Aug. 23, Luthi noted Mexico’s possible role in the sale. “With the recent changes in Mexican law, our neighbor to the south is eager to attract US companies into their portion of the Gulf of Mexico,” he said. “The continuing onslaught of ever-changing US regulatory policies may tilt companies towards investing more in Mexican waters and thus dampen interest in this sale.”

Mexico's fourth phase of Round 1 bidding, its deepwater auction, is slated for December.  

Last year’s western gulf Lease Sale 246, the previous low point in activity, ended with 5 firms submitting 33 bids on 33 tracts, totaling $22.7 million in apparent high bids (OGJ Online, Aug. 19, 2015). It offered about 4,000 tracts on 22 million acres.

Held during a month in which the Brent crude oil spot price averaged more than $100/bbl, western gulf Lease Sale 238 in 2014 saw 14 firms place 93 bids on 81 tracts, with a sum of apparent high bids at $110 million (OGJ Online, Aug. 20, 2014). It offered about 4,000 tracts covering 21.6 million acres.

Lease Sale 248 is the 11th gulf sale and the final one for the western planning area under the Obama administration’s Outer Continental Shelf oil and gas leasing program for 2012-17. The first 10 sales offered more than 60 million acres and netted nearly $3 billion.

Contact Matt Zborowski at matthewz@ogjonline.com.

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