Oil and Gas Lease Sales in Gulf of Mexico Attract $3.7 Billion

Two federal sales of offshore oil and natural gas leases in the Eastern and Central Gulf of Mexico attracted more than $3.7 billion in high bids March 19, inaugurating enhanced revenue sharing with oil and gas producing Gulf states, instituting higher royalty rates and underscoring the region's continuing importance as a vital source of domestic energy production for the nation.

The first sale, the Central Gulf of Mexico Sale 206, attracted a record-setting $3,677,688,245 in high bids. This sets the record in high bids in U.S. leasing history since area-wide leasing began in 1983.

"Today's lease sales mark an important milestone in sharing substantially increased revenue from offshore oil and gas development with states willing to support it," said Secretary of the Interior Dirk Kempthorne, who opened the lease sales and announced the high bid totals.

"Beginning with Lease Sale 224, Louisiana, Mississippi, Alabama and Texas will receive a greater share in all these revenues, including bids, rental payments and royalties," Kempthorne said. "These states will share in 37.5 percent of the high bids from today's sale and all future revenues generated from the acreage leased today."

For Central Gulf of Mexico Sale 206, Interior's Minerals Management Service, which conducted the sales, received 1,057 bids from 85 companies on 615 tracts resulting in a record $3,677,688,245 in high bids.

For Eastern Gulf of Mexico Sale 224, MMS received 58 bids from 6 companies on 36 tracts resulting in $ 64,713,213 in high bids with an estimated 37.5 percent of that amount going directly to four Gulf producing States.

"Today's sales emphasize the Gulf's strategic value for America's energy security and the significant economic benefits of environmentally safe oil and gas production for the nation and the Gulf of Mexico oil and gas producing states," said Randall Luthi, Director of the Minerals Management Service.

Lease Sale 224 encompasses 118 whole or partial unleased blocks covering 546,971 acres in the Eastern Planning Area. The acreage is located 125 statute miles and greater offshore, south of the Florida panhandle and west of the Military Mission Line in water depths ranging from 2,657 feet (810 meters) to 10,213 feet (3,113 meters).

Eastern Sale 224 is the first sale where the revenue sharing provisions of the Gulf of Mexico Energy Security Act of 2006 start immediately. The states of Alabama, Mississippi, Louisiana, and Texas will share in 37.5 percent of the high bids on whole and partial blocks in the Eastern Planning area. These four Gulf producing States will also share in 37.5 percent of all future revenues generated from the acreage leased today in the Eastern Planning Area.

The enhanced revenue sharing program was mandated by the Gulf of Mexico Energy Security Act of 2006. No royalty relief will be issued with these leases. With Central Gulf of Mexico Lease Sale 206, the royalty rate for blocks in all Gulf of Mexico water depths is increased to 18 3/4 percent from 16 2/3 percent.

In addition, 12.5 percent of revenues from today's lease sales will be deposited into the Land and Water Conservation Fund for use by states to enhance parklands and for other conservation projects. "This is significant because as we deplete a natural resource, it is important that we also invest in our natural resources," Kempthorne said.

Lease Sale 224 is the only sale scheduled to be held in the Eastern Gulf of Mexico under the current Five Year Outer Continental Shelf Oil and Gas Leasing Program. The acreage included in this Eastern GOM Lease Sale 224 was last available for lease in 1988.

"The new revenue sharing provision will provide funds to help the four Gulf producing States meet the educational, environmental and infrastructure needs of their communities," noted Luthi.

The sale offered 5,569 tracts comprising about 29.8 million acres in federal areas offshore Louisiana, Mississippi, and Alabama. The acreage is located from three to 230 miles offshore in water depths of about 10 feet (three meters) to more than 11,200 feet (3,400 meters).

Approximately 34 percent of the tracts receiving bids in this sale are in ultra-deep water -- more than 5,249 feet (1,600 meters). The deepest tract to receive a bid is Lloyd Ridge, Block 286 in 3,076 meters of water. The highest bid received on a block was $ 105,600,789 submitted by Anadarko E&P Company LP, Murphy Exploration & Production Company USA, Samson Offshore Company for Green Canyon Block 432.

"MMS expected continued strong interest from industry in the deepwater and ultra-deepwater areas of the Central Gulf," said Luthi. "This high level of interest is being sustained by the information gained through new discoveries and the advancements in deepwater technology."

Sale highlights for Central Sale 206 include Hess Corporation, which submitted 25 high bids for a total of $437,541,152; Cobalt International Energy, which submitted 36 bids for a total of $389,056,079; and BP Exploration & Production, which submitted a total of 63 bids for a total of $336,575,445.

BP Exploration & Production submitted the highest number of high bids for Sale 206. Chevron submitted the second-highest number of high bids (49) for a total of $240,987,863.

Hess submitted the highest dollar amount of total bids (42) at $531,196,402.

The top five bids for Sale 206 were Anadarko, Murphy E&P and Samson Offshore for Green Canyon 432 at $105,600,789; Marathon Oil for Walker Ridge 226 at $93,024,910; Hess and Cobalt International for Green Canyon 858 at $85,418,889; Chevron for Green Canyon 945 at $81,063,073; and Cobalt for Keathley Canyon 163 at $74,418,889.

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