Exxon Mobil, Chevron Top Bidders in GOM Lease Sale

HOUSTON (Dow Jones Newswires), August 21, 2008

Exxon Mobil Corp. was the top bidder on the latest Gulf of Mexico Western Lease Sale organized this week by the U.S. Interior Department, underlying the company's interest in becoming a bigger player in the region.

The Irving, Texas, company won 130 bids for offshore leases in the Gulf of Mexico. The oil giant offered a total of $127.33 million for the leases. It was followed by Chevron Corp., which won 20 bids offering $127.28 million, according to the Minerals Management Service.

Norway's Statoil ASA, Louisiana-based and privately owned Llog Exploration Offshore and Royal Dutch Shell were among the top five successful bidders.

Exxon Mobil's leadership in the bidding contrasts with its previous participation in Western Gulf lease sales. The largest U.S. oil company by market value, for example, didn't bid in the last sale held on Aug. 22 last year, while Chevron was a minor bidder.

"Exxon Mobil is a specialist in terms of having a global portfolio, but this shows the Gulf of Mexico works fine for them now," said July Wilson, lead analyst at Wood Mackenzie. "They may have had more attractive opportunities previously, but companies' interests move from region to region."

Exxon Mobil is a small producer in the Gulf of Mexico, where a quarter of the U.S. oil production and about 10% of the natural-gas production occur. Exxon Mobil has 25% of BP PLC's massive Thunder Horse field, but it doesn't operate any major production of its own.

The Minerals Management Service, which oversees offshore oil and gas development, said that 423 bids were received from 47 companies on 319 tracts offered in offshore Texas. The U.S. Interior Department's Western Gulf of Mexico oil and gas lease sales Wednesday reaped $487 million for the federal government. Last year, $369 million was bid in the same sale.

The Interior department said around 17% of the 319 tracts awarded are in ultra-deep water. The highest bid received on a tract was $61 million submitted by Statoil for Block 380 in the Alaminos Canyon. There is continued strong interest in Gulf of Mexico lease sales as more drilling in the region is seen as a possible solution to increase domestic production of oil and natural gas and to ease high energy prices. Republicans have been taking advantage of high oil prices and public support for more domestic exploration as an election-year strategy to unbalance Democratic leadership that has been largely opposed to lifting an offshore moratorium.

Deepwater leases in the central Gulf are more highly sought after than eastern and western Gulf areas. While the lease sale revenues were a fraction of the record $3.7 billion in the last Gulf lease sale in March, Wednesday's sale saw the average price per offered tract nearly triple to $1.5 million a block compared to $664,000 a block earlier this year. The next central gulf lease sale is scheduled for spring 2009.

"In the midst of the national discussion about energy production, the activity at today's sale signals that the offshore oil and gas industry is serious about developing our nation's resources," said Interior Secretary Dirk Kempthorne.

Copyright (c) 2008 Dow Jones & Company, Inc.

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