In the longer term—or at least the medium—prospects for Gulf drillers and OSV companies have to be reasonable. But until recently, at least, their attitudes could be characterized as wavering between uncertainty and hesitancy.

That's in line with a worldwide situation that saw GlobalSantaFe Corporation reporting last month that its worldwide SCORE, or Summary of Current Offshore Rig Economics, for February 2003 was down from the previous month's SCORE by 0.5 percent, continuing a depressing trend. The SCORE compares the profitability of current mobile offshore drilling rig dayrates to the profitability of dayrates at the 1980-1981 peak of the offshore drilling cycle. A separate SCORE is calculated for certain types of rigs and certain regions to indicate the relative condition of rig markets. The good news in last month's SCORE was that the Gulf of Mexico SCORE actually rose.

In the months ahead, the uptick for the Gulf could become more marked.

This is because, once again, it is becoming clear that the U.S. Gulf is about the only place in the U.S, where drilling is not regarded as a nefarious activity.

Testimony to the public's aversion to drilling is the Bush Administration's lack of success in getting Congress to endorse its Energy Policy proposals. First the Democratic controlled Senate rejected one of the centerpieces of that policy—drilling in the ANWR—then, last month, the Republican controlled Senate narrowly defeated it.

In reaction, Senate Energy and Natural Resources Chairman Pete Domenici (R.-N.M.) declared that "this vote today was cast by senators who don't understand the link between abundant, affordable energy and a vigorous economy. I do. I refuse to turn my back on this economy and the American consumer."

He promised that his committee will soon mark up energy legislation that will expand oil and gas production in the Gulf of Mexico and other designated energy production sites.

Initial indications are that those other designated production sites are likely to include places that will upset environmentalists, such as the Northern Rockies and involve laying natural gas pipelines along routes that will provoke fierce controversy.

What all this means, of course, is that, once again, the Gulf of Mexico, will emerge as just about the only place in the U.S. where it's actually practical to consider drilling.

This was reflected in the success of the Mineral Management Services Central Gulf of Mexico lease sale last month. It attracted $315,531,229 in high bids from 74 companies.

Lease Sale 185 offered 4,460 tracts comprising of approximately 23.4 million acres offshore Alabama, Louisiana, and Mississippi; the MMS received 793 bids on 561 tracts. The total of all bids was $414,738,677.

"The results of this lease sale are impressive and reflect a strong commitment by industry to increase domestic oil and gas production during this crucial period for our Nation," said MMS Director Johnnie Burton.

"Although interest in deepwater continues, two-thirds of the bids in this sale are on the shelf. We believe this reflects definite industry interest in deep gas in shallow waters partly in response to royalty relief offered as part of MMS's Deep Gas Initiative," said Burton.

The highest bid received on a block was $8,216,885, submitted by Hunt Petroleum (AEC) Inc. – Cheyenne International Corp., and Energy Partners, Ltd. for South Marsh Island–South Addition/109.

U.S. demand for natural gas is rising and finding new sources of supply is critical. That is leading companies like Cabot Oil and Gas, Houston, which has not previously done so to any great extent, to venture offshore.
Cabot and its partners bid on 16 blocks at the recent Central Gulf lease sale and were the apparent successful bidder on 12 blocks. These 12 blocks would be operated by Cabot and are focused on moderate depth exploration targets on the shelf. Cabot's apparent high bids total $6.5 million net to the company.

"This is our first extensive effort offshore and I am pleased with the outcome," said Chairman and CEO Dan O. Dinges. "Acreage and quality prospects are key to success in this industry. This sale provides Cabot with a base set of leases from which to grow." Dinges added, "We see the offshore arena as a complement to our existing onshore Gulf Coast program and another focus area for investment opportunities, along with the Rocky Mountains, Mid-Continent, East and Canada."
Another high bidder with an interest both in deepwater and deep gas was BHP Billiton. It was the apparent high bidder on 50 blocks. It had submitted bids on a total of 65 blocks.

BHP Billiton's winning bids, both the net amount in partnership arrangements and as a 100 percent interest-holder, are valued at approximately $12.2 million, or nearly $245,000 per block, net to BHP Billiton.

The company submitted 29 bids on deepwater acreage, being the successful bidder on 17 blocks. These are primarily deep, subsalt prospects along the Atwater Foldbelt play fairway. BHP Billiton holds a 100 percent interest on 11 of these leases, while holding equity interests between 50 and 67 percent in the remaining six. All 17 deepwater blocks complement BHP Billiton''s current leasehold positions in existing play fairways.

In addition to play fairways where the company has already built a strategic acreage position, BHP Billiton also pursued new opportunities for natural gas discoveries in the expanding deep shelf gas play. In partnership with Newfield Exploration Company, BHP Billiton bid on 35 blocks, submitting successful bids on 33 blocks in the West Cameron, East Cameron, Vermilion and South Marsh Island protraction areas. These are located in shallow waters, and BHP Billiton is the designated operator with a 55 percent working interest in each block.

"Our geoscientists have identified several significant prospects closer to shore that are deep targets and tend to be gas prone," said Bernie Wirth, Vice President of Exploration and Appraisal for the Gulf of Mexico. "They are located in the middle of existing infrastructure close to the robust gas market of the United States, which can provide attractive margins with shorter cycle times than exploration in deeper waters."


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