In what was called the "best" western Gulf of Mexico (GOM) sale in nearly a decade for both the number of bids submitted and the amount of money bid, the Western Gulf of Mexico (GOM) Lease Sale 200 on Wednesday garnered $340.9 million from 62 companies despite attempts to block the sale by the state of Louisiana and a continuing legal threat to the leases.

The Minerals Management Service (MMS), which conducted the auction, reported total bidding reached $462.760 million, which was 38% higher than a year ago (see Daily GPI, Aug. 18, 2005).

Top bidders included BP Exploration & Production Inc. and Petrobras America Inc. BP submitted the highest single bid, $21 million, for Keathley Canyon Block 58. Petrobras America submitted the second highest single bid, $12.8 million, for Keathley Canyon Block 59. Petrobras America submitted 34 high bids, the most offered for the leases, worth a total of $45.484 million. BP followed with 31 total high bids worth $37.470 million. Hess Corp. submitted 30 high bids worth a total of $16.8 million. Shell Offshore Inc. submitted 28 high bids worth $35.4 million, and Kerr-McGee Oil & Gas Corp. submitted 27 high bids worth nearly $18 million.

"Sale 200 is the best western sale in terms of number of bids submitted in the past nine years, and the best in eight years for the amount of money bid," said Chris Oynes, MMS GOM regional director. "The level of activity underscores the Gulf of Mexico's importance to domestic energy production and the oil and gas industry's interest in expanding their deepwater operations."

The MMS received 541 bids on 381 tracts, led by interest in the Garden Banks and Keathley Canyon areas. In all, more than 50% of the tracts receiving bids were in these two areas. High bidding also appeared to be sparked by the large number of newly available tracts. Of the 445 newly available tracts, 130 received bids. The Garden Banks and Keathley Canyon areas accounted for 80 of the new tracts receiving bids.

For a detailed review of the companies participating and the bids offered, visit www.mms.gov.

Interest in deepwater oil and gas production continues to grow, with 67% of all tracts receiving bids in water depths of more than 400 meters. The increased number of tracts receiving bids in shallow water also indicates ongoing industry interest in deep gas in shallow waters, the MMS said. In this sale, 3,865 blocks comprising 20.87 million acres offshore Texas and the deeper waters offshore Louisiana were offered. MMS said the high bids for each block will be evaluated to ensure the public receives fair market value before a lease is awarded.

The lease sale was a success despite legal maneuvers by the state of Louisiana to block it. A court hearing is set for Nov. 13 to determine whether the leases will actually be awarded (see Daily GPI, Aug. 16). In his ruling Monday on the sale, U.S. District Judge Kurt D. Engelhardt of the Eastern District of Louisiana rejected the state's bid for a preliminary injunction to stop the lease sale. However, the decision was not a complete setback for Louisiana. The judge said repeatedly that some of the claims in the state's lawsuit against MMS had merit and that he was inclined to issue a permanent injunction following the November hearing. Faced with this threat, Engelhardt warned potential bidders to beware because the leases awarded could turn out to be worth little.

In its lawsuit filed in July, Louisiana argued that the federal government failed to conduct an adequate environmental assessment of the damage to the state's coastline caused by Hurricanes Katrina and Rita before moving forward with the lease sale.

In keeping with agency procedure, high bidders will be required to pay one-fifth of their bids by Friday, according to MMS spokeswoman Caryl Fagot in New Orleans. An MMS geologist will review the potential oil and gas prospects of each lease that was bid on to determine if the agency is receiving a fair value, she said. The review period could take up to 90 days. If a bid is accepted, high bidders will then pay the remaining four-fifths of their bids, as well as first-year rental payments.

Fagot declined to say whether high bidders would still be required to pay their bids if Engelhardt should issue a permanent injunction in November. "We really can't answer that until we see the judge's ruling. We just don't know. We, as an agency, can't speculate," she told NGI.

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