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BP Big Winner in Western GOM Lease Sale

Close to $110 million was submitted in high bids for 81 tracts offshore Texas in Western Gulf of Mexico (GOM) Lease Sale 238 on Wednesday, with most of the attention directed to the transboundary area of the U.S.-Mexico border and for Alaminos Canyon in the Lower Tertiary Trend.

Officials with the Department of Interior's Bureau of Ocean Energy Management (BOEM) unveiled the bids on Wednesday in New Orleans. The lease sale attracted a total of $109.95 million in high bids covering 433,823 acres on the Outer Continental Shelf (OCS). Fourteen operators submitted 93 bids that totaled $135.46 million.                                           

By comparison, Western GOM Lease Sale 233 last summer offered for bid 20.7 million acres offshore Texas, with 12 operators making 61 offers for 53 blocks that covered slightly more than 300,000 acres (see Daily GPISept. 2). More than $102.35 million in high bids were made in 2013 sale with total offers estimated at about $144.69 million.

BOEM Deputy Director Michael Celata, who is in charge of the GOM region, said during a press conference the increased number and amount of bids in this year's auction in part resulted from BP plc's renewed participation, as well as interest in the U.S.-Mexico transboundary region.

BP had been barred from bidding under Macondo well blowout sanctions, which were lifted in March (see Daily GPIMarch 19). The operator wasted no time in building momentum in the deepwater GOM, where it has the most rigs in operation.

BP offered the most bids of any company in the auction at 31, and the most high bids at 27.

Most of the interest in the lease sale was for "the deepwater, the Lower Tertiary Trend...That's historically been the area where companies have bid and that trend continued with this sale," Celata said. One reason that the Western GOM historically has drawn fewer explorers than the Central region of the Gulf is its composition, which trends more toward natural gas.

ConocoPhillips appeared to be the highest bidder for a single block, with an offer of $16.79 million to explore a section of the deepwater Alaminos Canyon. BP had made the second-highest offer, for the same block, at $12.52 million.

Chevron scored three of the top six high bids in the sale, with five high bids overall. Among the other highest bidders, BPH Billiton LLC captured 16 offers, while ConocoPhillips had 10.

High bids also were submitted by units of Anadarko Corp., Arena Energy LP, Castex Offshore Inc., ExxonMobil Corp., Focus Exploration LLC, LLOG Bluewater Holdings LLC, Royal Dutch Shell plc, Stone Energy Offshore LLC, Talos Energy Offshore LLC and Venari Offshore LLC.

All of the unleased areas, totaling 4,026 blocks in the Western GOM planning area, were offered in the sale, including in the Flower Garden Banks National Marine Sanctuary. The areas are nine to 250 miles-plus off the Texas coast in water depths of 16-10,975 feet (5-3,346 meters).

Of the blocks available for leasing Wednesday, 24 received bids within three statute miles of the maritime and OCS boundary with Mexico. Leases issued on those blocks are subject to the terms of the U.S.-Mexico Transboundary Hydrocarbon Reservoirs Agreement (see Daily GPIOct. 14, 2013). In the Western GOM Sale 223 held in March, a partial area in the transboundary region was offered, with ExxonMobil the only bidder on three tracts (see Daily GPIMarch 19).

The Alaminos Canyon, a deepwater play with Lower Tertiary potential, has proven to be a big draw for explorers, in part because of its location in the prospective Lower Tertiary Trend. On the U.S. side of the maritime boundary with Mexico in the same area, Shell operates the Perdido Development, a floating production facility with a host spar in Alaminos Canyon Block 857 that began operating in 2010 (see Daily GPIApril 5, 2010).

The latest lease sale had offered 21.6 million acres, building on five previous sales held under the OCS five-year program for 2012-2017 (see Daily GPIApril 15). The five lease sales already have offered more than 60 million acres for development and garnered $2.3 billion in bid revenues.

The latest sale is to be evaluated to ensure that the public receives fair market value before leases are awarded. Production from the lease sale could result in the production of 116-200 million bbl of oil and 538-938 Bcf of natural gas, according to BOEM.

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