Exploration Spending Cutbacks Reflected in Lease Sale Results

Exploration Spending Cutbacks Reflected in Lease Sale Results
BOEM announces results of Central and Eastern Gulf Lease Sales 241 and 226 amid protests, calling the sale results "respectable" despite low bidding.

The slowdown in oil and gas industry investment due to low oil prices was reflected in the results for Central Gulf of Mexico Lease Sale 241 and Eastern Gulf of Mexico Lease Sale 226.

The Bureau of Ocean Energy Management (BOEM) received 148 bids from 30 companies for 128 blocks covering 693,962 acres in the Central Gulf, and no bids for acreage offered in the eastern Gulf sale. The Central Gulf sale garnered approximately $156 million in high bids and approximately $179 million in total bids. Forty-five million acres were offered in both lease sales.

A BOEM spokesperson confirmed to Rigzone that the central sale results were the fourth lowest in terms of high bids received since 1983. Despite the low turnout, BOEM officials said the results were “respectable” and in line with expectations, and that the Gulf of Mexico remains a “cornerstone” of the United States’ energy future. BOEM expects bidding to pick up once oil prices start to recover, said Department of the Interior Assistant Secretary for Land and Minerals Management Janice Schneider during a conference call with reporters.

Operators who did participate in bidding continue to show interest in the deepwater Gulf; 41 blocks in more than 5,249 feet (1,600 meters) received bids. Chevron Corp. and Venari Offshore LLC offered the highest bid of approximately $13 million for Mississippi Canyon Block 434. The Miocene and Norphlet plays in the Mississippi Canyon area are trends of interest, and operators are continuing to bid in the Lower Tertiary trend.

Last year’s Central Gulf of Mexico Lease Sale 235 attracted $538.7 million in high bids and $583.2 million in total bids, down from the $850.8 million in high bids and $1.09 billion in total bids in Central Gulf Lease Sale 231 in March 2014.

Sale 226 offered 162 whole or partial unleased blocks covering 595,475 acres in the Eastern Planning area not subject to congressional moratorium. Most of the Eastern Gulf of Mexico Planning Area can’t be offered for lease until 2022 under the Gulf of Mexico Energy Security Act of 2006. Schneider said that industry is still interested in the eastern Gulf, but their response is due to a normal reaction to market conditions.

Protestors at the Superdome in New Orleans, where the lease sale was held, did not stop the reading of bids, nor do BOEM officials expect protests to deter oil and gas companies from future bidding, Schneider said. The protestors – which included Gulf Coast residents supported by local and national environmental and social justice groups – called for an end to federal offshore fossil fuel lease sales in the U.S. Gulf. Last week, these groups sent a letter to President Obama calling for the immediate halt of Wednesday’s auctions. According to their website, nonewleases.org, the groups protesting also have called for 1,000 workers to be hired immediately to repair offshore oil infrastructure.

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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