The Walker Ridge in the Lower Tertiary of the deepwater Gulf of Mexico (GOM), which may — or may not — hold vast amounts of oil and natural gas reserves, captured the highest bid for a block in the Minerals Management Service’s (MMS) Central GOM sale last week.

With a bid of $90.45 million, or about $15,710/acre, Shell Offshore Inc. outbid 12 others for a chance to explore Block 7 on Walker Ridge. Besides being the priciest, the Lower Tertiary block also received the highest number of bids, according to the MMS.

Last year Chevron Corp., Devon Energy Corp. and Statoil ASA completed the deepest extended drill stem test in history on the Walker Ridge, with the successful production test on the Jack No. 2 well (see NGI, Sept. 11, 2006). Wood Mackenzie predicted in July that the GOM deepwater would likely attract record bids in Wednesday’s lease sale (see NGI, July 30).

In all, the MMS reported that 84 companies participated in Wednesday’s lease sale, offering a total of $5.246 billion bids in the sale, which made it the second largest sale in U.S. leasing history. The MMS had 5,359 blocks (28.71 million acres) for lease, but only 723 received bids. Companies offered 1,428 bids in total, with 1.98 bids on average offered per block.

Notably, about 40% of the tracts bid on in the sale were in ultra-deepwater — 1,600 meters or more — and 190 bids were received for leases in waters deeper than 2,000 meters. Another 187 blocks receiving bids in two areas: water depths less than 200 meters deep and in water depths 800-1,599 meters deep. In water 1,600-1,999 meters deep, 100 blocks received bids. Thirty-seven blocks received bids in waters 400-799 meters deep, and 22 blocks received bids in waters 200-399 meters deep.

“MMS expected the deepwater and ultra-deepwater areas of the Central Gulf to receive a high level of interest in this sale,” said MMS Director Randall Luthi. “The progress being made both in terms of discoveries and advanced technology provide incentive for operators to explore these frontier areas.”

Although Walker Ridge drew the highest bid, the most money was spent in the deepwater Green Canyon area, which took the rest of the highest bids in the auction. Marathon Oil Co.’s bids were the second and third highest in the auction. It captured Green Canyon, Block 423, with a bid of $74.4 million ($12,914/acre), and Block 328, with a bid of $69.5 million ($12,064/acre). Nexen Petroleum Offshore U.S.A. Inc. won Green Canyon Bock 996 with a bid of $69.4 million ($12,047/acre). And newcomer Cobalt International Energy LP was awarded Green Canyon Block 817 with a bid of $55.3 million ($9,598/acre).

BP led all others by the number of winning blocks, grabbing the bids for 83 of the 125 total bids, with net exposure of $107.1 million ($225/acre). Shell, which was the highest bidder overall, followed, winning 69 of its total 94 bids, and a net exposure of $554.6 million ($1,395/acre). In third place was Cobalt, which won 53 of its 130 bids, with net exposure of $211.3 million ($692/acre). Chevron U.S.A. Inc. was fourth, capturing 44 of 90 bids, with net exposure of $283.4 million ($1,118/acre). In fifth place was Nexen, with 30 of 72 bids won, and net exposure of $113.6 million ($657/acre).

L LOG Exploration Offshore Inc. was in sixth with 28 high bids totaling $98.7 million. Marathon Oil Co. was in seventh place with 27 high bids totaling $221.7 million, and Murphy Exploration and Production Co. was eighth with 26 bids totaling $161 million. Petrobras America Inc. also had 26 high bids totaling $108 million, as did Eni Petroleum US LLC, which had $47.8 million in total high bids.

The highest amount — $2.144 billion — was bid for blocks in waters 800-1,599 meters deep, followed by $1.379 billion for blocks in waters 1,600-2,000 meters deep. Another $1.33 billion was bid for blocks in waters deeper than 2,000 meters.

©Copyright 2007Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.