Downsized Eastern Gulf of Mexico Lease Sale 181 drew 190 bids from 14 exploration and production companies on Wednesday, the Department of the Interior’s Minerals Management Service reported. High bids totaling $341 million were made on 95 tracts out of the 233 tracts offered.
The area covered about 1.3 million acres, reduced from 5.9 million earlier this year because of pressure from Florida’s congressional delegation and Florida Gov. Jeb Bush. Although the sale area is 100 miles offshore from the Alabama-Florida state line and over 285 miles from Tampa, Florida has long opposed drilling off its coast because of concerns about the environment and its tourism revenues.
Despite the reduced size of the sale, however, producers still found a significant number of attractive prospects. The area is estimated to contain 1.25 Tcf of commercially recoverable natural gas and 185 million bbl of oil.
“These tracts have not been available for exploration since 1988, well before major advancements in deepwater exploration and production technology,” noted Anadarko CEO Robert J. Allison Jr. Anadarko had 26 high bids totaling $136 million and had the single highest bid, $26 million for Lloyd Ridge Block 91 in 1,600 feet of water. “The opportunity to explore this acreage, and the significant resources that lie beneath, is a positive move for this administration and for energy consumers,” said Allison.
“It’s as if we’ve been peering over the fence for the last 13 years, with great opportunities just out of reach. Finally, the fences are coming down,” he said. “In addition to providing vital energy resources for the nation, exploration and production operations are conducted with the utmost care so that marine and coastal environments are protected.”
Shell Offshore submitted $110 million in 28 high bids, the most of any producer. The other high bidders included Kerr-McGee, Marathon, Amerada Hess, Spinnaker, Dominion, Petrobras, Murphy and EOG. Phillips, Chevron, Ocean, Pioneer and Devon also participated in the bidding.
“We have gathered and interpreted an extensive amount of information about these blocks, and we’re convinced they hold substantial oil and gas reserves with relatively low geologic risk,” said Anadarko’s Allison. “Since a lot of the preliminary work has already been completed, the prospects can be drilled relatively soon — as soon as late 2002 — which makes this addition a good complement to Anadarko’s portfolio. As evidenced in this sale and other recent activity, Anadarko is systematically and strategically increasing our position in the deepwater Gulf of Mexico.”
Prior to this sale, Anadarko held a total of 351 leases in the Gulf, of which 109 are located in deep waters. Additionally, the company has a partnership with BP to explore 95 deepwater blocks held by BP in the Garden Banks and Keathley Canyon areas of the Central Gulf of Mexico.
Kerr-McGee holds the most leases among independent producers in the Gulf and participated in high bids on 16 blocks with a total exposure of $34.7 million. “The leases we obtained in this sale, which was the first sale in this area in over a decade, give us a presence in new plays that complement our already outstanding deepwater Gulf portfolio,” said CEO Luke R. Corbett. Kerr-McGee also is the largest holder of deepwater Gulf blocks among independents. With these additional blocks, Kerr-McGee will hold interests in 372 deepwater blocks in the Gulf and will operate more than 70% of these leases with an average working interest of 50%.
Spinnaker participated in a total of 26 bid submissions, third most in the industry, and all its blocks were located in water depths greater than 6,500 feet and are approximately 5,760 acres in size. It was the apparent high bidder on eight blocks.
“Lease Sale 181 is a positive step in improving our energy security,” Interior Secretary Gale Norton said. “True national security must expand conservation programs, reduce our dependence on foreign oil and create new jobs — all while protecting the environment.”
Those are good reasons to reinstate the Eastern Gulf into the MMS’s Five-Year Plan for offshore lease, according to Tom Fry, president of the National Ocean Industries Association (NOIA), which represents 300 companies with offshore business operations, including producers. Despite the strong demand for drilling in the Eastern Gulf, these resource-rich lands are not included in the current administration’s plan for leasing for 2002-2007, noted Fry. The Five-Year Plan determines where and when companies can lease parcels of ocean lands for the purpose of energy production.
“By removing key resource areas, which can be rapidly integrated into already existing infrastructure from the Five-Year Plan, the administration is denying itself the flexibility necessary to effectively plan for and manage our energy future,” said Fry. “If the current draft plan is approved, the nation will be unable to access these energy resources until 2008. Placing energy resources off limits at this crucial time of economic and geopolitical uncertainty is tantamount to planning a crisis.
“Even if this area is not leased, retaining the option to lease in the Five-Year Plan provides our policymakers enhanced maneuverability with which to effectively manage unpredictable U.S. energy needs in an uncertain world.”
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