WoodMac: US Gulf Lease Sales Could Be Biggest in Nine Years

HOUSTON, Jul 26, 2007 (Dow Jones Commodities News)

The U.S. government's upcoming sale of drilling rights to swaths of the deepwater Gulf of Mexico has the potential to top $1 billion for the first time in nearly a decade, according to a report by Wood Mackenzie.

The sales, expected later this year, include many newly available blocks in the lower tertiary, an area 150 miles off the coast of Louisiana where no oil is currently produced, but where the energy industry has made several large finds.

Adding to the expected frenzy is the expiration of unexplored leases sold in the late 1990s. A decade ago, a series of deepwater discoveries and tax breaks sparked one of the biggest lease sales on record. Companies bought far more acreage than they could explore, and many will be forced to hand over promising blocks, the report said.

Bidding will likely be split between producers looking to discover the next half-billion-barrel field, and those looking to make smaller finds that can be hooked into the infrastructure built around the current crop of deepwater projects, the report said.

"A large concentration of deepwater blocks in desirable areas make up the bulk of what will be offered for lease in 2007," the report said.

Exploring those leases will be another matter, the report said. With few spare rigs available, companies could end up in the same situation a decade from now as the bidders of 1997 - owners of promising territory, but unable to take advantage of it.

Copyright (c) 2007 Dow Jones & Company, Inc.

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