Border tracts attract lease sale bids

Written by Nick Blenkey
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AUGUST 20, 2014 — Today’s Western Gulf of Mexico Lease Sale 238 attracted $109,951,644 million in high bids for 81 tracts covering 433,823 acres on the U.S. Outer Continental Shelf offshore Texas. A total of 14 offshore energy companies submitted 93 bids.

Today’s lease sale, which offered 21.6 million acres, follows five previous sales held under the Obama Administration’s Outer Continental Shelf Oil and Gas Leasing Program for 2012-2017 (Five Year Program). These five lease sales have offered more than 60 million acres for development, and garnered $2.3 billion in bid revenues.

Today’s sale offered all unleased areas (excluding those located in the Flower Garden Banks National Marine Sanctuary) in the Western Gulf of Mexico planning area, including 4,026 tracts from nine to more than 250 miles off the coast, in depths ranging from 16 to more than 10,975 feet (five to 3,346 meters). BOEM estimates the lease sale could result in the production of 116 to 200 million barrels of oil and 538 to 938 billion cubic feet of natural gas.

Today, 167 of the blocks available for lease were located or partially located within three statute miles of the maritime and continental shelf boundary with Mexico. Leases issued on these blocks are subject to the terms of the U.S. – Mexico Transboundary Hydrocarbon Reservoirs Agreement and 24 of those blocks received bids.

Fourteen companies participated in the sale, which nominally put 21 million acres on the block, with 81 blocks totaling 433,823 acres sold.

The industry’s interest was concentrated on the Alaminos Canyon area and territory near the U.S.-Mexico maritime border that had previously been off limits for developmentAbout a quarter of the bids were for territory in that area.

Chevron made the highest single bid in the sale — a $16.8 million offer for Alaminos Canyon block 431. Chevron also won Alaminos Canyon block 215 by offering $8.5 million for the tract — nearly 10 times the $873,760 bid by its only competitor, Anadarko Petroleum Corp.

Other big bidders included BHP Billiton, ConocoPhillips and BP, which was the high bidder on 27 of its 32 bids.

Shell Oil Co. lodged just one bid, for territory near its Perdido developments in the Gulf. Its $1.75 million bid succeeded in winning it Alaminos Canyon block 905. It said that the acquisition strengthens its existing position in the Perdido fold belt, where the company already claims production from 14 wells.

“Today’s sale is a typical Western Gulf sale, and while it included some healthy bidding, it was not expected to fetch the eye popping bids that typically accompany a Central Gulf sale,” said National Ocean Industries Association President Randall Luthi. “That said, this sale is important in many aspects. Current Federal policies allow sales on only about 13 percent of the Outer Continental Shelf, so every sale is important. Each sale shows a commitment by the United States to continue to provide the opportunity, however limited, to develop offshore oil and natural gas. Today’s sale also demonstrates the continued commitment of the U.S. oil and natural gas industry to invest hard to find exploration dollars in areas that have been sold and resold again. With so many other countries opening up new promising areas, it is a testament to the oil and gas industry that so many have decided to try and keep jobs and investment here at home. This sale allowed many of the smaller exploration and production companies to successfully compete for leases in both deep and shallow water, keeping a diversity vital to the overall energy and jobs portfolio of the United States. Lastly, this sale also reaffirms the industry’s great interest in deep water prospects in the transboundary area.”

The sale of offshore oil and natural gas leases today in the western Gulf of Mexico highlights the benefit of allowing development in the 87 percent of the Outer Continental Shelf the federal government has placed off-limits,” said API Upstream Group Director Erik Milito.

“Today’s lease sale is a reminder that opening new areas to offshore energy exploration and production could create nearly half a million American jobs and raise tens of billions of dollars to help fund the government,” said Mr. Milito. “The western and central sections of the Gulf of Mexico remain important areas for domestic oil and natural gas production, but they have been continually explored for decades while the vast majority of U.S. waters are kept off-limits.

“Tremendous potential exists for job creation and energy development in the Atlantic, Pacific, Arctic and Eastern Gulf of Mexico,” he added. “We should seize the opportunity to further America’s energy renaissance by exploring and producing in new areas offshore.”

Lease sale statistics

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