Offshore Gulf of Mexico bids almost identical from last year

by The Associated Press

With oil tapping the $30-per-barrel mark and natural gas prices remaining steady, exploration companies filed almost the exact number of bids as they did a year ago for offshore leases in the western Gulf of Mexico.

The U.S. Minerals Management Service said it received 391 bids on 323 tracts off the coasts of Texas and western Louisiana. Last year, the annual sale attracted 386 bids on 320 tracts. The bids were to be opened Aug. 21 in New Orleans.

For the second straight year, gas prices are hovering just above $3 per thousand cubic feet. Unlike last year’s sale, however, the latest auction comes after a relatively mild winter during which consumers were spared the giant price hikes of the winter of 2000-2001, when gas went above $10.

The MMS is continuing a push to bring additional natural gas to the marketplace with royalty relief on deep deposits in the shallow shelf areas of the Gulf. Many of the tracts had been leased before, but were returned to the government by exploration companies that did not pursue the then-unprofitable deep deposits.

“They’re probably coming back on the some of these older leases,” said MMS spokesman Barney Congdon.

Of the 323 tracts receiving bids, 164 are in shallower waters that could potentially lead to the deep-gas deposits. The royalty relief program was used for the first time during March’s sale of leases in the eastern Gulf. That sale attracted $363.2 million in high binds on 506 sites off the coasts ofLouisiana, Mississippi and Alabama.

Under the relief program, no royalties will be collected on the first 20 billion cubic feet of gas produced from a well drilled 15,000 feet or deeper below sea level. The relief ends if gas prices reach $5.

Oil prices have recently been inching closer to $30 per barrel despite a lagging world economy.

At the time of last year’s western Gulf sale, oil was around $25 per barrel.