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U.S. to combine Eastern, Central Gulf of Mexico lease sales Minerals Management Service says logistics, economics, behind decision; last Eastern sale drew only 16 bids Ray Tyson Petroleum News Houston Correspondent
The U.S. Minerals Management Service, due in part to a small turnout at the last Eastern Gulf of Mexico lease sale, has decided to combine the next sale with the much larger Central Gulf lease sale on March 16 in New Orleans.
“There are a whole lot of practical reasons,” MMS spokeswoman Caryl Fagot said Jan 4. “It’s strictly convenience, logistically easier and more economic to do them all at once.”
Eastern Gulf Lease Sale 189, held in December 2003, took less than five minutes to complete and generated just $8.4 million in high bids. There were only 16 bids on 14 of the 138 blocks offered, compared to 190 bids on 95 blocks two years earlier, when the region was reopened to oil and gas leasing, generating a whopping $340.5 million in high bids in Sale 181.
“We certainly aren’t offering that many tracts … so the sale won’t take that long at all,” Fagot said.
Upcoming Eastern Gulf Sale 197 will consist of just 124 blocks covering about 714,240 acres, according to MMS. That compares to 4,043 blocks encompassing 21.3 million acres to be offered in Central Gulf Sale 194 on the same day. Spiderman discovery in Eastern Gulf Nevertheless, Sale 197 could attract some interest, particularly from explorers looking for additional acreage to expand or protect discoveries made since a small portion of the vast Eastern Gulf region was reopened to leasing in 2001.
Significant discoveries since the Eastern Gulf was reopened are Spiderman, Atlas, Atlas NW, Jubilee and San Jacinto. They are to be tied to a recently announced natural gas production hub that also will include nearby discoveries Merganser and Vortex.
However, most of the original Eastern Gulf planning area was closed by the U.S. Interior Department to exploration and development, including all near-shore acreage, because of strong opposition from environmentalists and elected officials in neighboring states, including Florida Gov. Jeb Bush.
What remains of the Eastern Gulf sale area is “ultra-deepwater” acreage situated from 100 to 196 miles offshore in water depths ranging from more than 5,000 to more than 11,000 feet. MMS conservatively estimates the area holds undiscovered reserves of 65- to 85 million barrels of oil and from 265- to 340 billion cubic feet of natural gas. Central Gulf area both shallow and deepwater acreage In contrast, the Central Gulf sale area consists of both shallow near-shore and deepwater acreage spread over a wide area offshore Louisiana, Mississippi and Alabama. Water depths range from just a few feet to more than 11,000 feet.
The Central Gulf also is home to some of the largest oil discoveries in the entire U.S. Gulf, including the 1.5 billion barrel Thunder Horse complex operated by BP. MMS estimates that upcoming Central Gulf Sale 194 alone could result in the discovery and production of 276- to 654 million barrels of oil and 1.59- to 3.3 trillion cubic feet of natural gas.
Last year’s Central Gulf Sale 190 generated a surprising $368.8 million in high bids, attracting a total of 829 bids on 557 blocks, the largest number of bids submitted for a Central Gulf offering in six years. The prior year’s sale netted just $297.6 million.
Of the 4,043 blocks to be offered in the next Central Gulf sale, 1,180 blocks are in water depths of less than 1,312 feet and carry five-year lease terms; 125 blocks are in water depths ranging from 1,312 to 2,624 feet and carry eight-year terms; and 2,738 blocks are in water depths from 2,624 to more than 11,000 feet and carry 10-year terms.
Central Gulf Sale 194 and Eastern Gulf Sale 197 also will offer popular government drilling incentives for both deep and shallow waters, primarily involving suspension of federal royalties on initial production from qualified leases.
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