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Eastern gulf lease sale 189 tentatively set for Dec. 10 GOM sale would feature 138 ultra-deepwater tracts plus royalty relief Petroleum News Houston Staff
The U.S. Minerals Management Service has moved a step closer to scheduling another oil and gas lease sale for the Eastern Gulf of Mexico, saying July 17 there would be 138 blocks available and standard incentives to encourage drilling in the relatively unexplored region.
MMS also issued its final notice for Western Gulf of Mexico Lease Sale 187, scheduled for Aug. 20 in New Orleans.
Proposed Eastern Gulf of Mexico Lease Sale 189, only the second sale for the region since the area was re-opened to leasing in late 2001, is now tentatively scheduled for Dec. 10, also in New Orleans.
Sale 181, the first Eastern Gulf lease offering to be held in 13 years, ranked among the most successful for its size in gulf history, generating $340.5 million in high bids on just 95 tracts. Shell Offshore and big independent Anadarko Petroleum won the day, accounting for 72 percent of high bids.
However, Sale 181 did not escape controversy. Companies howled when MMS, yielding to environmentalists and politicians concerned that offshore drilling might damage Florida’s tourist industry, reduced the eastern sale area by three-quarters and eliminated all but ultra-deepwater acreage ranging from around 5,000 feet to over 10,000 feet.
Still, the 2001 Eastern Gulf lease offering dwarfed the much-larger 1988 sale by eight-fold in terms of high bids. In contrast, the 1988 sale offered 8,149 tracts compared to just 233 in Sale 181.
December’s Eastern Gulf Lease Sale 189, pending final approval, would be even smaller than the 2001 offering. While the sale area would encompass the same boundaries, more than a third of 256 blocks that make up the area this time around was scooped up in the 2001 sale. In effect, only 794,880 acres of the 1.4-million acre planning area would be available for leasing. Exploration a mixed bag Exploration has been a mixed bag since the Eastern Gulf was re-opened to leasing, with Anadarko recording two small discoveries (Atlas and Jubilee) and a dry hole (Hawkeye) either within or just outside the sale area. Marathon Oil, drilling on a lease it acquired in the 1988 sale, had a dry hole on its Barracuda prospect.
Nevertheless, MMS is touting the upcoming sale with estimates for undiscovered reserves of 65 to 85 million barrels of oil and 265 to 340 billion cubic feet of natural gas. “The prospect of holding this sale … is exciting because of the potential oil and gas in the area,” said Chris Oynes, MMS’ gulf regional director.
MMS estimated the “net economic value” for the proposed sale to be between $100 and $500 million. To encourage drilling, MMS is offering royalty suspension on the first 12 million barrels of oil equivalent produced from commercial discoveries. In addition, lessees can apply for added discretionary royalty relief. Royalty relief available Successful bidders in next month’s Western Gulf Lease Sale 187 also could benefit from various portions of royalty relief for both oil and natural gas discoveries, depending on water depth or whether the discovery is located beneath the relatively shallow waters of the continental shelf.
Sale 187 will include 3,996 blocks encompassing 21.7 million acres, but only a few hundred blocks can be expected to actually receive bids in this annual, area-wide lease sale. MMS estimates the sale could uncover 136 to 262 million barrels of oil and 81 billion to 1.44 trillion cubic feet of natural gas.
In water depths less than 200 meters, MMS is offering royalty suspension on the first 20 bcf of gas production from discoveries located below a geological depth of 15,000 feet.
In deeper waters, MMS will waive royalties on the first 5 million barrels of oil equivalent in water depths of 400 to 799 meters, 9 million barrels in water depths of 800 to 1,599 meters and 12 million barrels in water depths greater than 1,600 meters. As in other regions of the gulf, successful bidders will have the opportunity to apply for additional royalty relief on production in more than 200 meters of water, if guidelines are satisfied.
Last year’s Western Gulf Lease Sale 184 generated high bids of $151.3 million on 323 tracts. Independents carried the show, capturing well over half of the tracts offered in the sale.
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