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Gulf of Mexico Lease Sale Shows “Cautiously Optimistic Attitude”

Credit: BOEM
Credit: BOEM

By The Maritime Executive 2019-08-21 20:08:02

Wednesday's U.S. region-wide Gulf of Mexico Lease Sale 253 generated $159,386,761 in high bids for 151 tracts covering 835,006 acres. 27 companies participated in the lease sale, submitting $174,922,200 in bids.

Michael Murphy, research analyst at Wood Mackenzie, said that infrastructure-led exploration continues to be a theme for the sales. BHP added 20 blocks and submitted by far the largest sum of high bids at just under $42 million, including the single highest bid of $22.5 million on Green Canyon 124.

Newly taken over by Occidental Petroleum, Anadarko Petroleum made the second-largest sum of high bids at $23.4 million on 14 blocks.

The “somewhat modest” results reflect the cautiously optimistic attitude of an offshore industry still in recovery, says National Ocean Industries Association Vice President of Communications and Member Development Nicolette Nye. “While companies have improved the efficiency of their operations and rig rates and supply chain prices are more competitive, oil prices remain flat. Bidding activity today may reflect the slower than desired improvement in prices. There is also uncertainty surrounding pending regulatory actions such as financial assurance and fair market valuation.” 

Deepwater and ultra-deepwater tracts drew high interest in this sale but shallow water tracts also proved to be attractive. “Overall, todays’ sale demonstrates that the offshore oil and gas industry remains committed to the U.S. Gulf of Mexico,” says Nye. “Each newly leased block represents a chance for further exploration, development and economic and energy opportunity. The U.S. Gulf of Mexico will continue to be a vital part of America’s economic and energy future.”

Lease Sale 253 included 14,585 unleased blocks, located from three to 231 miles offshore, in the Gulf’s Western, Central and Eastern Planning Areas in water depths ranging from nine to more than 11,115 feet (three to 3,400 meters). 

“The Gulf of Mexico is the crown jewel of our nation’s energy portfolio,” said Mike Celata, director of BOEM’s New Orleans Office. “As one of the most productive basins in the world, the development of its resources are essential to the nation’s energy security.”

Lease Sale 253, livestreamed from New Orleans, was the fifth offshore sale held under the 2017-2022 National Outer Continental Shelf Oil and Gas Leasing Program. Under this program, 10 region-wide lease sales are scheduled for the Gulf, where resource potential and industry interest are high, and oil and gas infrastructure is well established. Two Gulf lease sales will be held each year.

According to the U.S. Energy Information Administration, U.S. petroleum and natural gas production increased by 16 percent and by 12 percent respectively in 2018, and these totals combined established a new production record. The U.S. surpassed Russia in 2011 to become the world's largest producer of natural gas and surpassed Saudi Arabia in 2018 to become the world's largest producer of petroleum. Last year’s increase in the United States was one of the largest absolute petroleum and natural gas production increases from a single country in history.