Back to New Orleans for next Gulf lease sale

MMS believes enough hotel rooms exist in hurricane-torn city to accommodate bidders; agency securing space to hold lease sale

Ray Tyson

Petroleum News Contributing Writer

The U.S. Minerals Management Service, heavily disrupted by Hurricane Katrina, has decided to hold the next Gulf of Mexico oil and gas lease sale in the usual location, storm-ravished New Orleans.

“We’re in the process of securing a place” to conduct the sale, MMS information officer Debra Winbush told Petroleum News Nov. 30.

Though many MMS staffers who fled New Orleans ahead of Katrina have since returned to work, the agency was concerned whether enough hotel rooms would be available in The Big Easy to accommodate sale participants.

“Oh, Yes. There should be enough rooms,” Winbush said.

MMS Gulf Regional Director Chris Oynes, in an October interview with Petroleum News, was determined to hold Central Gulf Lease Sale 198 on time in March, but was uncertain where the sale would be held due to hurricane damage in New Orleans.

He said then the March sale most likely would be in New Orleans, if the flooded city had sufficiently recovered, or in Houston, Texas, the fourth largest city in the United States and home to many oil and gas companies.

MMS typically hosts two major area-wide lease sales per year in New Orleans — one for the Central Gulf in March and another for the Western Gulf in August. These sales generate hundreds of millions of dollars in revenue for the federal government, while providing industry with new prospects to explore.

The central offering is generally the larger of the two Gulf sales, attracting more bidders and generating more cash for the government. For example, last March’s Central Gulf Lease Sale 194 drew nearly $354 million in high bids and 72 participating companies.

A final notice for sale 198 is expected to be issued by MMS around Dec. 22, Winbush said, and should mention the sale’s exact location, usually a major hotel in downtown New Orleans. Past sales have been held at the Hyatt Regency, Sheraton and Royal Sonesta.

The proposed area for the March sale encompasses about 4,000 unleased blocks in the Central Gulf, covering about 21 million acres both in the relatively shallow waters of the continental shelf and in deeper waters of the Gulf.

The blocks are located from three to 210 miles offshore in water depths ranging from as shallow as 13 feet to as deep as 11,154 feet. MMS believes the proposed lease sale could result in the production of 276 million to 654 million barrels of oil and 1.59 trillion to 3.3 trillion cubic feet of natural gas.

Central Gulf Lease Sale 198 also would be the first central sale with higher rental rates first implemented in Western Gulf Lease Sale 196 held last August. The new rates are $6.25 per acre in water depths less than 656 feet and $9.50 per acre in water depths greater than 656 feet.

The usual government royalty relief incentives also are being offered in sale 198, including any production from deepwater leases purchased in the sale, as well as from deep-gas leases purchased on the continental shelf.