The Western Gulf of Mexico (GOM) Lease Sale 233, which offered for bid 20.7 million acres offshore Texas, yielded fewer offers and lower total high bids than in the past, with 12 operators making 61 offers for 53 blocks that covered just more than 300,000 acres, Bureau of Ocean Energy Management (BOEM) officials said Wednesday.
More than $102.35 million in high bids were offered in the sale, with total offers estimated at about $144.69 million.
BOEM offered grabs on a total of 3,864 blocks in the Western GOM, 107 of which were newly available. The offers were for all unleased and nonprotected areas in the Western GOM from nine miles to more than 250 miles off the coast, in water depths of 16-10,975 feet (5-3,346 meters). Thirty-seven of the 61 offers were for blocks in water depths of at least half of a mile.
By comparison, Western GOM Lease Sale 229 last November of over 20 million acres, netted almost $134 million (see Daily GPI, Nov. 29, 2012). In last year’s sale, 131 bids were submitted by 13 producers for 116 blocks, with high bids totaling $133.8 million. A 39 million-acre lease sale held in March for the Central GOM netted almost $1.2 billion high bids (see Daily GPI, March 21).
GOM Regional Director John Rodi, who oversaw the lease sale in New Orleans, told reporters that overall, officials were “pleased” with the results even though the number of tracts receiving bids was “comparatively low, compared to many Western sales since leasing began in 1983. However, the good news is that the dollar value of the high bids submitted puts this sale far from the bottom…but maybe the seventh lowest in terms of high bids.”
The sale was “good enough for the circumstances,” Rodi said. “I hesitate to draw a conclusion on the dollar amount of the bidding…”
The lower number of tracts receiving bids in the Western GOM is “a continuation of what we’ve seen in the past in recent years,” he said. “Companies are bidding on a smaller number of tracts, but they are spending more money on the smaller tracts.”
Another reason there may have been fewer bidders for Western GOM property is “our belief is that in the last year there has not been a large amount of new information and there hasn’t been a significant number of new discoveries…that would increase interest in a particular sale,” the GOM chief noted.
Operators participating in the sale were Anadarko US Offshore Corp., Apache Shelf Exploration, Castex Offshore, Chevron Corp., ConocoPhillips, EnVen Energy Ventures, ExxonMobil Corp., Hess Corp., Maersk Oil Gulf of Mexico, Shell Offshore, Statoil Gulf of Mexico and W&T Offshore.
ConocoPhillips submitted the highest bid at $30.58 million for Alaminos Canyon (AC) Block 475, and the Houston producer was also the overall highest bidder in the sale, with total bonus bids of $50.32 million on 29 tracts.
The AC block, which is in less than a mile of water, attracted four high bids in all, the most for any offered. Four other AC blocks received multiple bids, and two offers were made for High Island Block 380.
Alaminos Canyon extends into the super-hot Lower Tertiary Trend of the deepwater, where Chevron Corp. and several operators are digging wells and building infrastructure to haul in an expected oil and gas bounty. The area also is near the Perdido Hub, which carries natural gas to shore.
A “major factor” in the heightened interest in the region is likely from seismic surveys completed by WesternGeco last year, Rodi said. The surveys “had nice subsalt imaging, and we believe it’s possibly one of the big factors” in drawing bids. The Western GOM lease sale in 2009 also attracted high bidders in the Alaminos, including from ConocoPhillips (see Daily GPI, Aug. 20, 2009).
Rodi said the new seismic data “is really attempting to do a better job of imaging subsalt…In terms of our geologists, we believe the new data did provide a much better image of prospectivity of the lease of blocks that were part of this surveyed area…
“Companies that may have not been bidding in this area saw a renewed interest,” he said. “The fact that ConocoPhillips is bidding is generating a lot of interest…and we’re happy to see their interest this year and last.”
Missing from the lease sale were bids by BP plc, once the biggest producer in the GOM, a position now held by a unit of Royal Dutch Shell plc. BP was suspended from pursuing federal contracts last year by the U.S. Environmental Protection Agency (EPA) because of the Macondo well blowout, a suspension that BP is fighting in court (see Daily GPI, Aug. 19).
“BP chose not to bid in this sale, but they certainly had the option to bid,” said Rodi. He explained that BP could have bid and been awarded leases if the suspension is lifted before the actual bids are given. “Since we’re not sure exactly what the state of the EPA suspension will be, at some point it may be lifted…and BP could have preserved their right to bid in the sale.”
BP cited the suspension and its substantial GOM portfolio, which includes about 700 leased blocks, for opting out.
“Due to our extensive portfolio of Gulf acreage and the uncertainty surrounding the suspension and debarment of certain BP businesses, we have decided not to participate in this week’s lease sale,” management stated. “We hope we can reach a reasonable resolution with regulators so that America’s top energy investor over the past five years can once again enter into new contracts with the U.S. government.”
At least one offer was for an area within the 3-statute mile boundary area north of the OCS boundary between the United States and Mexico, Rodi noted. Bids submitted on blocks in the transboundary area won’t be opened until after Congress approves an agreement between the United States and Mexico, at which time Interior may determine whether it is in the best interest of the United States to open the bids or return them unopened, he said.
The latest Western GOM lease sale, the third in the Department of Interior’s offshore program for 2012-2017, could result in 116-200 million bbl of oil and 538-938 Bcf of natural gas, according to officials. Each of the bids submitted is to be evaluated to ensure the public receives fair market value before leases are awarded. Sale statistics for Sale 233 are available at: www.boem.gov/Sale-233.
In response to the low number of bidders and offers, Louisiana Republican Sen. David Vitter said the “numbers are lagging compared to what they could and should be…” Domestic energy production on federal lands “is far lower than projected before [the Obama] administration took office and is trending in the exact opposite direction of rapid growth we’re seeing on private and state land.” The total drop-off in federal revenue “due to the lack of lease sales” went from $10 billion in fiscal 2008 to zero dollars for fiscal 2011, and the revenue “has only slightly increased” since then.
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