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Vol. 12, No. 16 Week of April 22, 2007
Providing coverage of Alaska and northern Canada's oil and gas industry

Shell leads sale

$39M of $42M from Shell, Total at $2.2M; just over 500,000 acres receive bids

Kristen Nelson

Petroleum News

Leasing moved farther offshore in the Shell-dominated Beaufort Sea outer continental shelf lease sale held April 18 in Anchorage. Total high bids were $42,165,195 in Minerals Management Service sale 202. All but a handful of tracts receiving bids are out beyond existing OCS leases.

Shell Gulf of Mexico Inc. accounted for $39,272,708 of the $42 million high bids, 93 percent, and took 49 of 92 tracts.

This is the second MMS Beaufort Sea sale in a row dominated by Shell, which accounted for $44 million of $46 million in high bids at sale 195, held in March 2005, the company’s return to Alaska (see story in April 3, 2005, issue of Petroleum News). Shell had the 10 top bids at this year’s sale, with the highest at $14,104,239, an average of $6,122 per hectare for Flaxman Island tract 6609. All of those 10 highest bids were for Flaxman Island blocks, the easternmost area of the sale receiving bids.

MMS Alaska Region Director John Goll said at the bid opening in Anchorage April 18 that 95 bids were received on 92 blocks, a total of 203,188 hectares or 502,087 acres.

Goll said after the sale that the large blocks to the east, where Total and Shell bid, were 20 to 30 miles offshore. The blocks are beyond existing discoveries.

This is the last sale in this five-year plan, Goll said. There is no decision yet from the Secretary of the Interior on the next five-year plan, but depending on that decision a Chukchi Sea sale that is part of the next five-year plan is tentatively scheduled for early next year.

Total takes 32 tracts

Just as the 2005 sale saw the return of Shell to Alaska, this sale saw the return of Total E&P USA (see story page 1).

Total took 32 tracts for $2,200,336, 5.2 percent of the total high bids, followed by Eni Petroleum with seven tracts for $466,000, 1.1 percent of the sale total; Keith Forsgren, two tracts, $185,062, 0.4 percent of the sale total; ConocoPhillips Alaska, one tract, $60,000, 0.1 percent of the sale total; and BP Exploration (Alaska), one tract, $1,089.

BP picked up acreage adjacent to its Liberty prospect; ConocoPhillips picked up a tract adjacent to tracts north of the National Petroleum Reserve-Alaska that it had acquired at an earlier sale. Keith Forsgren picked up two tracts far offshore north of Harrison Bay.

Eni’s tracts are on the southern and northwestern edges of a large block of tracts the company took northwest of Nikaitchuq in the last MMS Beaufort Sea sale in March 2005. Eni has just taken over as operator of the Nikaitchuq unit; it bought out Anadarko Petroleum’s interest earlier this year (see story in April 15 issue of Petroleum News).

Shell picked up acreage in a large block — 20 tracts — north of the central North Slope onshore area; it also added a single block to acreage it acquired in the March 2005 sale north of the Nikaitchuq-Oooguruk development area to the west. Shell’s 2005 acreage is closer to shore, adjacent to state acreage.

Large block north of Point Thomson

The area which drew the most bids in the sale — and the only area with contested tracts — is on the eastern side of the sale area, north of Point Thomson, where Shell and Total picked up contiguous and somewhat intermingled acreage (see map).

These tracts are north of the Kuvlum and Hammerhead discoveries, where Shell took a large number of tracts in the 2005 sale.

The only competition for tracts was in this area, with Shell topping the Total bids on three tracts: $2,143,239 to $58,012 on Flaxman Island block 6406; $273,239 to $58,012 on Flaxman Island block 6407; and $423,239 to $58,012 on Flaxman Island block 6457.

All of the 32 Total tracts are in this large block, along with 28 of the 49 Shell tracts.

This is the agency’s 10th Beaufort Sea offering. The first was in 1979. The most recent sale was in March of 2005; 117 leases were issued from that sale, 607,285 acres. The sum of high bids at the 2005 sale was $46,735,081.

Beaufort Sea sales topped out in 1982 with a $2 billion sale of 662,860 acres.

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