Despite increasing production and the possible export of oil and gas from shales, interest in the development of the Gulf of Mexico (GOM) remains high.
As I wrote in my recent blog, as shale production continues to expand, deepwater development projects in the planning and early design stages may be postponed or shelved. But yesterday’s Gulf lease sales were strong.
The sales involved 329 GOM tracts covering some 1.7 million acres by the Department of Interior brought in $872 million in high bids. The sales build on three previous sales held under the Obama administration’s Outer Continental Shelf Oil and Gas Leasing Program for 2012-2017 that offered more than 60 million acres for development and garnered $1.4 billion in bid revenues.
Interior’s Bureau of Ocean Energy Management (BOEM) said that Lease Sale 231 for the Central Planning Area attracted about $851 million in high bids on 326 blocks covering 1.7 million acres on the U.S. Outer Continental Shelf (OCS) offshore Louisiana, Mississippi and Alabama. A total of 50 offshore energy companies participated in submitting 380 bids.
Lease Sale 225, the first of two lease sales proposed for the Eastern Planning Area under the administration’s five-year program, is the first sale that offered acreage in that area since 2008. The sale encompassed 134 whole or partial unleased blocks covering approximately 465,200 acres 125 miles south of eastern Alabama and western Florida. While some ongoing development exists in the area, the blocks received no bids. The area will be offered to industry again in 2016 under the current leasing program.
In addition to opening bids for these two sales, BOEM opened three pending bids in the August 2013 Western Planning Area Lease Sale 233 for blocks located or partially located within three statute miles of the maritime and continental shelf boundary with Mexico (U.S.-Mexico TransBoundary Area). One company submitted approximately $21.3 million in high bids on the three tracts.
The bids, which still must be evaluated by BOEM, comply with heightened environmental and due-diligence development requirements instituted subsequent to the Macondo incident.
The bids also confirm a robust and continuing OSV market potential in the GOM, despite the proliferation of lower-cost oil and gas production plays onshore.