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Gulf of Mexico lease sale draws $487M Exxon, Chevron, Statoil account for 70 percent of total winning bids, some 68% more than last year’s Western Gulf sale generated
By Ray Tyson For Petroleum News
Western Gulf of Mexico Lease Sale 207 drew a healthy $487.3 million in apparent high bids, some 68 percent more than what last year’s Western Gulf sale generated, and bringing the total high bids of all federal offshore lease sales from the U.S. Gulf and Alaska this year to $9.5 billion. That performance certainly ranks 2008 among the more successful years in the history of the U.S. leasing program, no doubt greatly helped by the extraordinary run up in world oil prices.
“In the middle of the national discussion about energy production, the activity at today’s sale (207) signals that the offshore oil and gas industry is serious about developing our nation’s resources,” said U.S. Interior Secretary Dirk Kempthorne, who attended the Aug. 20 lease sale in New Orleans, La.
Fifty-three companies bid One thing is certain about the financial outcome of latest Western Gulf sale: the government’s take in high bids would have been far less had high rollers ExxonMobil, Chevron and StatoilHydro decided to sit this one out. The two U.S.-based supermajors and Norway’s Statoil doled out a combined $342 million, representing just more than 70 percent of the total winning bids in the sale. Moreover, the highest 10 single bids submitted, including three by Chevron and two by Statoil, totaled $230 million, or just more than 47 percent of total high bids.
Western Gulf of Mexico Lease Sale 207, the final offshore sale of this year, drew 423 bids on 319 blocks with 53 companies participating. Last year’s Western Gulf Sale 204 received 358 on 282 blocks with 47 companies participating. Though comparable in size, Sale 204 drew just $289.95 million versus the $487.3 million for this year’s Sale 207. In part, the difference might be attributed to the re-emergence of Chevron and particularly Exxon as major lease sale players in the Western Gulf, at least in terms of the amount of money they spent. Other top bidders included Shell, Eni, Conoco Exxon was tops capturing 130 blocks for apparent high bids of $127.33 million, while Chevron collected just 20 blocks for $127.28 million. Statoil, which over the past several years has emerged as a major U.S. Gulf player, came in third with $87.35 million for just five blocks. Other top 10 finishers in Sale 207, in terms of the sum of high bids submitted, were: LLOG Exploration Offshore, $23.17 million for 11 blocks; Shell Gulf of Mexico, $20.19 million for 15 blocks; Anadarko E&P Co., $14.80 million for 19 blocks; Hess Corp., $14.16 million for 22 blocks; Eni Petroleum US, $11.12 million for five blocks; ConocoPhillips Co., $10.50 million for two blocks; and Devon Energy Production Co., $6.67 million for 20 blocks.Ultra-deepwater Alaminos Canyon Ultra-deepwater Alaminos Canyon, home to the multi-field Perdido Hub Lower Tertiary development, received some of the largest bids in the entire lease sale, including Statoil’s sale-high $61.1 million for Block 380, which also ranks among the five highest single bids ever submitted in a federal offshore lease sale in the Gulf of Mexico, according to U.S. Minerals Management Service (MMS) records.
Statoil also captured Alaminos Canyon Block 424 for $22.3 million, the fourth highest single bid submitted in Sale 207. Shell and Chevron, both Perdido Hub producers, also weighed in on Alaminos Canyon – Chevron’s $20.12 million for Block 775 and Shell’s $11.99 million for Block 771. Blocks 775 and 771 also made the top ten for blocks receiving the highest bids.
Located at Alaminos Canyon 857 in 8,000 feet of water, Perdido is expected to begin processing oil from the Western Gulf in 2010. That’s a trend, as wells are drilled and key infrastructure allows for subsea tiebacks, explained one MMS official. Two shallow water blocks in top 10 Chevron also submitted the second and third highest single bids in the sale — $52.1 million for Garden Banks Block 973 and $34.60 million for Garden Banks Block 972.
The highest bids are usually submitted on deepwater and ultra-deepwater blocks, areas with the greatest potential for large reserves. So the presence of two shallow water High Island blocks among the 10 largest single bids, both by LLOG Exploration Offshore for $8 million and $6 million, would have to be considered a sale surprise.
One highlight of the sale involved keen interest in a cluster of blocks on the boundary line between Keathley Canyon and Garden Banks where Chevron submitted two of its three top ten winning bids. That region of the U.S. Gulf also included six of the 44 blocks with two bids and an additional seven nearby blocks attracting single bids.
Century Exploration of New Orleans submitted the apparent high bid of $2.7 million for the sale’s most hotly contested block, topping six other bidders for High Island Block 469, a shallow-water block previously leased by Mariner Energy. MMS said its records show the block as a producing field as long ago as 1980. But MMS said production had ceased allowing the lease to expire. The agency said the keen interest in that recycled block might reflect an interest in drilling deeper zones for natural gas.
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