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First Offshore Sale Under 2012-2017 Leasing Program Announced

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First Offshore Sale Under 2012-2017 Leasing Program Announced

The U.S. Bureau of Ocean Energy Management (BOEM) will offer over 20 million acres offshore Texas as part of the Western Gulf of Mexico Lease Sale 229, Secretary of the Interior Ken Salazar and Bureau of Ocean Energy Management Director Tommy P. Beaudreau announced Monday.

The sale, scheduled to take place in New Orleans on Wednesday, Nov. 28, will be the first offshore sale under the Obama administration's new Outer Continental Shelf Oil and Gas Leasing Program for 2012-2017.

"We are moving forward expeditiously to create jobs by implementing the President's offshore oil and gas strategy for the next five years—a smart plan that focuses on the areas that contain the overwhelming majority of the energy resources," Salazar said in a statement Monday.

"With comprehensive safety standards in place, this sale will help us to continue to responsibly grow America's energy economy and reduce our dependence on foreign oil," Salazar said.

The sale will include approximately 3,800 acres covering 20.5 million acres located 9 to 250 miles offshore in water depths ranging from 16 feet to more than 10,975 feet (5 and 3,346 meters).

According to BOEM estimates, the proposed lease sale could result in production of 116 to 200 million barrels of oil and 538 to 938 billion cubic feet of natural gas.

The proposed lease sale terms include a series of measures to protect the environment, including stipulations requiring that operators protect biological sensitive features. The stipulations for marine mammals and sea turtles will require trained observers to ensure compliance and restrict operations when conditions warrant.

An increased minimum bid for deepwater tracts also is part of the proposed terms. Terms of the sale also include escalating rental rates and tiered durational terms with relatively short-base periods followed by additional time under the same lease if the operator drills a well during the initial period.

The Western Gulf of Mexico Lease Sale 218, held in December 2011, offered 21 million acres and attracted $324.9 million in accepted high bids.

Last month, $1.7 billion in high bids were made on over 2.4 million acres in Central Gulf of Mexico Lease Sale 216/222, the first Central Gulf lease sale held since before the Deepwater Horizon incident in April 2010.

Late last month, the Department of the Interior announced the proposed final offshore oil and gas leasing program for 2012-2017.

Salazar said the program would open the vast majority of known offshore oil and gas resources for development and included a 'cautious but forward-looking leasing strategy for the Alaska Arctic.'

The American Petroleum Institute was critical of the plan, which it said was a step backwards that would limit future energy production.

The proposed lease plan did not include areas offshore the U.S. Atlantic and Pacific coasts for leasing. Certain Arctic coastal areas will continue to be excluded from leasing, Interior said, including a 25-mile buffer area near the coast of Chukchi, as well as two subsistence whaling areas in the Beaufort Sea near Barrow and Kaktovik, Alaska.

The House Natural Resources Committee approved a bill to allow oil drilling in the Atlantic and Pacific Oceans, Dow Jones reported on July 18.



Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com.

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