Central Gulf lease sale nets $1.7 billion in high bids

Strong demand for new acreage, the high price of oil, and several new deepwater discoveries and developments were some of the reasons behind the whopping $1.7 billion in high bids that were submitted during this year’s Central Gulf of Mexico lease sale. 

More than $2.6 billion from oil and gas companies was exposed at the June sale held in New Orleans. A total of 56 companies submitted 593 bids on 454 tracts covering over 2.4 million acres. 

It had been more than two years since operators had access to new Central Gulf acreage.

During the last Central Gulf Outer Continental Shelf lease sale held just before the Macondo blowout in 2010, operators spent $949 million, exposing $1.3 billion.

“A sale of this size signals a strong industry commitment to the Gulf of Mexico and to our nation’s energy future and to more domestic jobs,” National Ocean Industries Association President Randall Luthi said in a statement following the sale. This sale shows the kinds of results we can have when industry and the federal regulators work together in a cooperative, non-combative manner. Close communication is not being cozy, it is being smart.”

“This sale, part of the president’s all-of-the-above energy strategy, is good news for American jobs, good news for the Gulf economy, and will bring additional domestic resources to market,” Secretary of the Interior Ken Salazar said after opening the sale.

The sale set the record for a single high bid, a $157 million offer from Statoil for Mississippi Canyon Block 718. Statoil beat out three other companies for the block. The second highest bid of $28 million was submitted by LLOG Exploration, followed by a $6 million bid from Shell Offshore and a $3.5 million bid from BP.

Mississippi Canyon Block 162, with seven bids, received the most attention. The highest bid for the block was $51 million from Chevron.

“While this sale is a step in the right direction,” Luthi continued, “industry would like the opportunity to lease and explore more areas outside the Gulf of Mexico and industry stands ready to do so quickly and safely. A truly all-of-the-above approach to energy production would involve opening up more WorkBoatoffshore areas.” 

About a third of the blocks receiving bids are in more than 5,000′ of water or deeper. Another 75 blocks are in water depths ranging from about 2,600′-5,240′ of water. 

The deepest water block attracting a bid was in block 965 in the Lund area. Shell offered $580,315 for the block in just over 10,000′ of water.

The sale wasn’t all about the glamorous deepwater. Operators also submitted bids for 193 blocks in water depths up to about 650′ of water. 

High oil prices and low natural gas prices are the reasons some operators are shifting their exploration spending to the liquids-rich and oil prospects on the shelf due to low natural gas prices. 

The sale offered more than 39 million acres for oil and gas development on the U.S. Outer Continental Shelf. — Jerry Greenberg 

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