The U.S. Department of the Interior’s Minerals Management Service (MMS) Central Gulf of Mexico (GOM) Lease Sale 206 last Wednesday set an all-time record for the value of high bids received with a total of nearly $3.68 billion out of more than $5.74 billion in total bids, the MMS said.

Eastern GOM Lease Sale 224, also held last Wednesday in New Orleans, received more than $64.7 million in high bids out of $72.14 million bid. The previous record for high bids was set in a Central Gulf sale held in 1983 when high bids reached $3.4 billion, according to the MMS.

U.S. Secretary of the Interior Dirk Kempthorne announced the final bids. During a press briefing after the sale he said expectations were that Sale 224 would receive about $50 million in high bids.

“The fact that we established a new record today, $3.677 billion [in Sale 206], that is an all-time high,” Kempthorne told reporters. “So it shows you that the need is there. It shows you also that the technology has been developed so that we can go into these deeper depths. The technology that has been developed and utilized in the Gulf has also allowed us to adapt to some other technologies onshore.

“This will ultimately help the United States lessen its reliance on foreign oil and gas. I will also tell you that we are just as aggressive on the renewable and alternative sources of energy, which is something that the president and Congress have made very clear is part of the mission of the Department of Interior and the Minerals Management Service.”

Currently there are more than 7,000 leases in the Gulf that account for 25% of the Nation’s domestically produced oil and 15% of the domestically produced natural gas.

For Central Gulf of Mexico Sale 206 MMS received 1,057 bids from 85 companies on 615 tracts resulting in a record $3,677,688,245 in high bids. For Eastern Gulf of Mexico Sale 224, MMS received 58 bids from six companies on 36 tracts resulting in $64,713,213 in high bids with an estimated 37.5% of that amount going directly to four Gulf producing States.

The highest bid received on a block was $105.6 million for Green Canyon Block 432, which was submitted by Anadarko E&P Co. LP, Murphy Exploration & Production Co.-USA and Samson Offshore Co.

“The number of bids received for both sales reaffirms the strong commitment of the offshore oil and gas industry to develop the nation’s oil and gas resources in the Gulf of Mexico,” said MMS Director Randall Luthi prior to the sale.

“The deepwater plays are getting the most interest and we know that that’s generally oil that they’re going after,” Luthi said following the opening of bids. “But we also saw a great amount of interest in the [Outer Continental] Shelf itself…so we assume that there’s some gas plays…”

Eastern Sale 224 is of special interest to Alabama, Mississippi, Louisiana and Texas. For the first time, these states will receive 37.5% of the revenues generated from all newly leased acreage in the Eastern Planning Area. The revenue-sharing provision was mandated by the Gulf of Mexico Energy Security Act. Louisiana will receive about 32% of the money; Alabama, 30%; Mississippi, 27%; and Texas 11%.

“The four Gulf producing states will see immediate benefits from leases awarded in Sale 224. They will share in the bonus bids received later [Wednesday] and later in the rents and any royalties collected,” said Luthi.

Lease Sale 206 encompassed approximately 5,000 unleased blocks covering more than 28.5 million acres in the Central GOM Planning Area offshore Louisiana, Mississippi and Alabama. The acreage is located from three to 230 miles offshore in water depths of about 10 feet to more than 11,200 feet.

Lease Sale 224, mandated by the Gulf of Mexico Energy Security Act of 2006, encompassed 118 whole or partial unleased blocks covering approximately 547,000 acres in the Eastern GOM Planning Area. The acreage is located 125 statute miles or farther offshore south of the Florida Panhandle and west of the Military Mission Line in water depths ranging from 2,657 feet to 10,213 feet.

Sale 224 is the only sale scheduled in the current Five-Year Oil and Gas Leasing Program to include acreage in the Eastern GOM. The acreage included in this Eastern GOM Lease Sale 224 was last available for lease in 1988.

“The high number of newly available deepwater leases in 2007 and 2008 is largely due to the leasing frenzy that took place in 1997 and 1998,” consultant Wood Mackenzie said in a report prior to the sales, noting that the churn from unexplored blocks expiring at the end of their 10-year primary lease term peaked in 2007 and 2008.

“In 1997, 1,242 deepwater blocks were leased…,” Wood Mackenzie said. “This is 255% more than the 10-year average from 1997 to 2006 and contrasts with the 2002 to 2005 average of 397 blocks leased per year. In 1998 an also above-average 878 deepwater blocks were leased.”

In the Eastern Gulf, Wood Mackenzie noted that the recently installed Independence Hub is currently running near its capacity of 1 Bcf/d. “Each of the gas fields tied back to the hub is expected to have a short production plateau,” the consultant said. “Wood Mackenzie has identified over 30 newly available deepwater blocks that would be close enough to potentially develop any gas discoveries as tie-backs to the hub. While the acreage available in the Eastern Sale 224 might be too far to tie back to the facility, a similar hub could be developed in this eastern extension.”

In Sale 206 the top five companies submitting the highest dollar amount of high bids were:

In Sale 206 the top five companies submitting the highest number of high bids were:

In Sale 224 the top five companies submitting the highest dollar amount of high bids were:

In Sale 224 the top five companies submitting the highest number of high bids was the same lineup as the highest dollar amount of high bids.

The MMS estimates that the Sale 224 area contains 100-140 million barrels of oil and 0.16-0.34 Tcf of natural gas, and the Sale 206 area contains approximately 0.877-1.457 billion barrels of oil and 3.653-5.892 Tcf of natural gas.

Revenue generated from Sale 224 collected by the MMS in fiscal year 2008 will be disbursed to the eligible states beginning in fiscal year 2009.

The sale attracted a delegation from the Iraq oil ministry, which was there to observe what Kempthorne called the United States’ “world-class program.”

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