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Vol. 12, No. 34 Week of August 26, 2007
Providing coverage of Alaska and northern Canada's oil and gas industry

Gulf sale draws $289.9M

Bidders go after Lower Tertiary prospects; Statoil leads in winning bids

Ray Tyson

For Petroleum News

Norway’s Statoil took no prisoners in Western Gulf of Mexico Lease Sale 204, accounting for seven of the highest single bids and nearly half of the entire $289.9 million in total winning bids submitted among companies participating in the Aug. 22 sale in New Orleans, La.

Sale 204, while drawing some huge bids, fell well short of the $341 million collected by Uncle Sam in last year’s Western Gulf lease sale. Sale 200 also was the best Western Gulf showing in nine years for the number of bids submitted and the best performance in eight years for the amount of money bid.

In total, 282 bids were placed on 358 tracts in Sale 204, down from last year’s 541 bids on 381 blocks. Only 47 companies participated compared to 62 companies last year.

However, considering the U.S. Minerals Management Service reduced the Western Gulf planning area by around 20 percent, due to a general boundary reconfiguration of the U.S Gulf’s three planning areas, Sale 204 actually was a better sale than last year’s, Lars Herbst, MMS acting director for the Gulf region, told Petroleum News.

“If you compare apples to apples, in other words the same blocks that would have been offered if the size were the same in the two lease sales, then compare them to the amount of bids, this was a more successful sale,” Herbst explained.

Ultra-deepwater the focus

Unlike some past sales in both the Western and Central Gulf, the high rollers this time around were focused on the “ultra-deepwater” of 5,000 feet and greater, although the relatively shallow waters of the Gulf’s continental shelf saw the return of one of the Gulf’s major players, BP Exploration and Production. BP, which previously sold all of its producing properties on the shelf, appeared to be adding to its inventory of “ultra-deep” natural gas prospects.

Still, the ultra-deepwaters of Alaminos Canyon and Keathley Canyon drew the monster bids from explorers who appeared to be in hot pursuit of the so-called Lower Tertiary, the Gulf’s hottest new play which already has led to large discoveries in both Alaminos and Keathley canyons, as well as in Walker Ridge located next door in the Central Gulf planning area.

“In the deepwater there was very high bidding related to known prospects, but there was some other general deepwater leasing that was directly related to the successes in the Lower Tertiary,” Herbst said.

Lower Tertiary proved at Jack

Last year’s highly anticipated production test of the Chevron-operated Jack prospect in Walker Ridge proved that the Lower Tertiary could support commercial production. Since, a group led by Shell announced the go-ahead of Alaminos Canyon’s Perdido Foldbelt hub development initially consisting of three discoveries — Great White, Silvertip and Tobago.

Statoil’s sale-high bids of $37.58 million and $27.58 million were submitted on two Alaminos Canyon blocks (810 and 811) located near the Perdido project, which will be supported by the first subsea pipelines extending so far into the Western Gulf. In fact, nine of the highest bids in the entire sale were for blocks in Alaminos and Keathley canyons.

“What we mainly make of it is that Statoil is really ready to make a presence known in the Gulf,” Herbst said. “Not that they haven’t participated in any previous sales, but they have definitely taken an interest in this lease sale, to pick up their lease inventory in the Gulf of Mexico.”

Statoil, which has become a major player in the U.S. Gulf through key acquisitions, far out-paced the field in terms of the amount of money spent in Sale 204, submitting $138.88 million to capture 33 blocks. In addition to the two highest bids in the sale, Statoil also was the apparent winner on five other top-ten blocks: Keathley Canyon block 178 ($13 million), Keathley Canyon block 136 ($11 million), Keathley Canyon block 135 ($9 million), Alaminos Canyon block 767 ($6.6 million) and Keathley Canyon block 405 ($5.2 million).

“These deepwater leases are promising acreage we look forward to develop in the years to come and they will contribute to securing our long-term commitment in the area,” said Oivind Reinertsen, senior vice president at Statoil’s office in Houston, Texas.

Devon, Petrobras in top 10

Other top-10 winners in terms of highest single bids included Devon Energy and Brazil’s Petrobras, with a joint bid of $15.1 million on Keathley Canyon block 94. Devon and Petrobras, 50-50 partners in the Lower Tertiary Cascade development in Walker Ridge, teamed up on numerous blocks in Sale 204. Rounding out the top 10 high bidders were LLOG Exploration Offshore, with an $8.63 million bid on High Island Area block 138, and Bois d’Arc Properties, with a $5.71 million bid on Alaminos Canyon block 943.

BP was among the thriftier sale participants, doling out just $31.01 million in high bids for 91 blocks, including a pot load beneath the gas-prone waters of the continental shelf. Other big winners, based on the total number of high bids submitted, included: ConocoPhillips with 24 blocks ($12.34 million), Anadarko Petroleum with nine blocks ($4 million), Focus Exploration with eight blocks ($1.74 million), Hunt Oil with five blocks ($630,608), Canada’s Nexen Petroleum with four blocks ($1.41 million) and Hydro Gulf of Mexico with 12 blocks ($9.99 million). Last year Statoil acquired Hydro, greatly enhancing its deepwater position in the U.S. Gulf.

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