Oil and natural gas producers in the latest federal offshore auction on Wednesday kept their bids narrowed and tailored to deepwater areas of the Gulf of Mexico (GOM) with existing infrastructure.
The Bureau of Ocean Energy Management (BOEM) had offered 77.8 million acres in Lease Sale 253, the fifth under the 2017-2022 Outer Continental Shelf Oil and Gas Leasing Program. Of the 14,585 blocks on offer in the region-wide auction of blocks in the Western, Central and Eastern planning areas, the auction attracted 165 bids total from 27 operators.
Only 151 blocks received bids of the 14,585 total on offer in the Western, Central and Eastern planning areas. Total bids came in at $174.92 million, with combined high bids of $159.39 million. Of the blocks receiving bids, 117 were in water more than 2,625 feet (800 meters) deep.
The bidding was down by more than one-third (35%) or $85 million from the last regionwide lease sale held in March. However, total high bids in Wednesday’s auction were the most since 2015, BOEM’s Mike Celata, director of the New Orleans office told reporters during a conference call.
“I think companies are looking to the future in some of the bidding that they did today,” Celata said.
Most of the bids in blocks near existing infrastructure, which is more conducive to tiebacks to drilling platforms, and are often less expensive to do than greenfield drilling. Operators also were keen to bid on prospects in the East Breaks and Lloyd Ridge formations, Celata said.
Equinor Gulf of Mexico LLC, with 23 high bids totaling $16.81 million, led the Top 10 list of bidders based on the total number of high bids submitted. BP Exploration & Production Inc. was close behind with 21 high bids amounting to $14.69 million, followed by BHP Billiton Petroleum (Deepwater) Inc.’s 20 bids totaling $41.85 million.
With 17 bids totaling $22.59 million, Chevron U.S.A. Inc. was in fourth place, while Anadarko US Offshore LLC’s 14 bids worth $23.40 million put it in fifth place. Juneau Oil & Gas LLC had nine high bids totaling $1.68 million to claim the sixth spot, followed by Shell Offshore Inc.’s seven bids that combined were $11.37 million.
In eighth place was Hess Corp., which had six high bids totaling $8.03 million, while ninth was EnVen Energy Ventures LLC, whose five bids totaled $2.95 million. Total E&P USA Inc. capped the Top 10 list with four bids totaling $4.94 million.
The deepwater again drew the most offers, with Mississippi Canyon Block 253 the biggest draw at four bids. Even though Green Canyon Block 124 drew only one offer, by BHP, it was the highest in the auction at $22.51 million.
Mississippi Canyon has become one of the biggest focuses for operators in recent years. Royal Dutch Shell plc last year struck its sixth find in the Norphlet formation of the blocks, about 13 miles from its Appomattox host.
The Green Canyon area of the deepwater also is gaining traction as Chevron Corp.’s touted Anchor project in Block 807 about 140 miles offshore Louisiana is likely to be sanctioned soon. Anchor, with an operating pressure of 20-kilo pounds/square inch (ksi), would be the first ultra-high-pressure project in the world to reach a final investment decision; the current limit is 15-ksi.
"With the total price per acre remaining relatively flat and an overall decrease in spend compared to the previous lease sale, capital discipline remains at the forefront in the Gulf of Mexico,” said Wood Mackenzie research analyst Michael Murphy.
“A notable participant was Anadarko,” Murphy said, of the operator recently acquired by Occidental Petroleum Corp., as one of the top bidders. Equinor and BP also built on their potential Lower Tertiary Trend in East Breaks and the Norphlet inventory in the Lloyd Ridge area.
“While we saw companies pick up acreage near remote areas, the infrastructure-rich Mississippi Canyon was the bid engine of the sale, capturing roughly 25% of total bids. Infrastructure-led exploration continues to be a theme that companies are playing into.”
Murphy noted that BHP’s bid for Green Canyon Block 124 trumped a bid by Equinor in the March sale of $1.2 million, which was rejected at the time by BOEM.
“BHP also bid on a cluster of blocks in the Garden Banks protraction area, close to the Anadarko-operated Gunnison facility and the Kosmos/BP Resolution prospect,” he said.
The area-wide auctions instituted since President Trump took office, which reversed years of leasing in specific targeted regions, have to date drawn limited interest from operators. Under the program, a total of 10 sales are scheduled, two every year, and include all available blocks in the combined planning areas.
As usual, offshore blocks excluded from the lease sales are subject to the congressional moratorium established by the Gulf of Mexico Energy Security Act of 2006; blocks adjacent to or beyond the U.S. Exclusive Economic Zone in the area known as the northern portion of the Eastern Gap; and whole blocks and partial blocks within the current boundaries of the Flower Garden Banks National Marine Sanctuary.