Central Gulf of Mexico Lease Sale 169 wasn’t a record, unlikethe last few lease sales, but heavy bidding seems to indicate lowcrude oil prices have not affected the industry’s aggressivedrilling plans. The U.S. Department of the Interior’s MineralsManagement Service (MMS) reported receiving 1,188 bids on 794tracts offered Wednesday. A total of 87 companies participated inthe sale. All bids totaled nearly $1.35 billion, and high bidstotaled more than $810.4 million. Of 4,180 tracts offered, 794received bids with an average of 1.5 bids per tract. By comparison,Central Gulf Sale 166, which took place a year ago, generated morethan $824 million in high bids but on more tracts. Then, 1,032tracts received bids of 5,059 offered.

Bob Stewart, president of the National Ocean IndustriesAssociation (NOIA), called this year’s Central Gulf sale verystrong. “What it means to me, in part, is that the level ofactivity in the Gulf of Mexico for a number of years is going tocontinue to be very strong.” Driving the robust bidding was royaltyrelief and technology improvements. Stewart noted this year’s salemade available about 200 tracts that weren’t available a year ago.These were tracts relinquished by lease holders who chose not todrill them. “Those tracts attracted a lot of attention.”

Sale results don’t appear to reflect industry concerns over theavailability of rigs or crews to work them. “If [rig, crewavailability] were going to temper a sale, it would have temperedthis one,” Stewart told NGI from New Orleans, the sale site.Companies apparently are expecting an ample number of new rigs tocome on line with the necessary crews in time for production fromacquired leases eight to 10 years out.

Expectations of stronger gas prices probably encouraged bidding,too, said Stewart. “In all of our focusing on oil prices, we’veignored gas, and I think gas was a driver in the sale,” he said,noting better than half of Gulf production comes in the form ofnatural gas.

The bulk of the most recent sale’s activity clearly was in waterdepths of 800 meters or greater where 539 tracts received bids.Overall bids totaled nearly $1.05 billion, and high bids totaledmore than $565.6 million. In depths of 200 meters or less, 201tracts received bids totaling more than $214.5 million, and highbids totaled more than $162.9 million. The next most popular zonewas in depths between 400 and 800 meters where 30 tracts receivedbids totaling more than $64.8 million, and high bids totaled nearly$58 million. Finally, depths between 200 and 400 meters had 24tracts receiving bids totaling more than $25.3 million with highbids totaling nearly $23.9 million.

The highest single bid was more than $28 million for GreenCanyon 955. Companies making the bid were Sun Operating LimitedPartnership and Statoil Exploration (US). The top 10 companiesbased on number of high bids submitted were Conoco, Shell, Mobil,Chevron, Texaco, Exxon, Union Oil Co. of California, VastarResources, Burlington Resources, and Marathon. Conoco made 122 highbids, and Marathon made 23 high bids. Marathon, however, had thegreatest sum of high bids at nearly $91.2 million. Mobil was secondat nearly $62.9 million, and Conoco was third at more than $48.7million.

Sale 169 was the third Central Gulf sale in which blocksreceiving bids in depths of 200 meters or more were eligible forconsideration under the Deep Water Royalty Relief Act. “Because ofthe tremendous success of royalty relief, there has been anunprecedented level of new activity in the Gulf of Mexico,” MMSDirector Cynthia Quarterman said in February. “Four new recordlease sales, a 95% increase in plans filed in deep-water (45 to 88in the last three years), and 11 new deep-water discoveries wereannounced in 1997, as well as record installations for tension legplatforms and the deepest subsea well.”

©Copyright 1998 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press,Inc.