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Gulf Lease Sale Robust Despite Hurricanes' Aftermath, Lower Gas Prices

Proving that even a string of rampaging hurricanes can't keep the oil and gas industry down, Central Gulf of Mexico Lease Sale No. 198 brought in more than $588.3 million in high bids out of more than $978.3 million in total bids. Activity marked a strong increase over last year's sales in the central and eastern Gulf and is testament to industry optimism for the Gulf, even in light of currently low (relatively) natural gas prices.

The sale, held last Wednesday, was opened with an address from Johnnie Burton, director of the Interior Department's Minerals Management Service (MMS). She said it was testimony to the resilience of the industry and Louisiana that the sale was being held in New Orleans and not in Houston, where part of the New Orleans MMS office remains stationed, at least for a little while longer. "We are returning all of our people to New Orleans in the next couple of months," Burton said. "As you all know, New Orleans people don't feel at home anywhere except in New Orleans."

Sale 198 offered 4,040 tracts/blocks, each receiving an average number of bids of 1.75 for a total of 707 bids. The sale encompassed 21.3 million acres in the Central Gulf OCS Planning Area offshore Louisiana, Mississippi and Alabama. Eighty-two companies participated.

By comparison, Central Gulf Lease Sale 194, garnered $354 million in high bids from 80 companies with $540 million in total bids. Eastern Gulf Lease Sale 197 resulted in $6.97 million in total bids (see NGI, March 21, 2005).

In last week's sale the top 10 companies based on total number of high bids submitted are: BP Exploration & Production Inc., BHP Billiton Petroleum (deepwater) Inc., Hunt Oil Co., Dominion Exploration & Production Inc., Hydro Gulf of Mexico LLC, Amerada Hess Corp., Anadarko Petroleum Corp., Woodside Energy (USA) Inc., Republic Exploration Inc., and LLOG Exploration Offshore Inc.

The top 10 companies based on the sum of high bids submitted are: Amerada Hess, Woodside Energy, Dominion Exploration & Production Inc., Newfield Exploration Co., Samson Offshore Co., LLOG Exploration Offshore, Petrobras America Inc., BP Exploration & Production, Repsol E&P USA Inc., and Anadarko Petroleum.

The single highest bid on a block was from Amerada Hess, which bid $42,789,994 for Green Canyon 287, beating seven other bidders.

Final awards will be granted after MMS reviews and authenticates the bids.

During her remarks before the sale, Burton took the opportunity to pat the industry on the back for weathering last season's hurricanes without incurring any significant environmental damage from spills. "You would expect some real devastating pollution ensuing from those hurricanes. The fact is that not a single well offshore leaked and had a major oil spill, significant spill. There were spills, but most of them were due to stored product on top of platforms that were either destroyed or badly damaged. I think this is something that is so important that it needs to be said over and over." For this she credited the industry and the regulatory regime the MMS has implemented over the last 25 years.

Burton said 20 to 25% of Gulf production remains shut in from hurricane damage. "We hope that this next hurricane season won't be as devastating and that we have a chance to get back to pre-hurricane levels pretty soon." She noted that the Gulf of Mexico accounts for about one-third of domestic oil production and 20% of domestic gas production.

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