Photo: Illustration; Source: BOEM

BOEM to hold next Gulf of Mexico lease sale in mid-November

The Bureau of Ocean Energy Management (BOEM) has proposed to offer around 78 million acres in a region-wide lease sale in the Gulf of Mexico scheduled for November 2020.

BOEM said on Thursday that the sale, set for 18 November 2020, would include all available unleased areas in federal waters of the Gulf of Mexico.

It is worth noting that Lease Sale 256 was originally scheduled for August, but due to the need to conduct additional analysis to consider recent changes in the oil and gas markets, which were due in part to the COVID-19 pandemic, the sale was moved to November.

Lease sale 256 map; Source: BOEM
Lease sale 256 map; Source: BOEM

Acting BOEM director Walter Cruickshank said: “Domestic offshore oil and gas production plays a vital role in strengthening our nation’s energy security. A strong offshore energy program provides affordable and reliable energy and jobs Americans need to fuel our economy“.

Also, BOEM is offering a 10-year primary term in water depths of 800 metres or deeper. The change means that leases in water depths of 800 metres to 1,600 metres will start with a primary term of 10 years, without the need to earn an extension of the primary term to achieve the full 10 years.

Before 2010, BOEM’s predecessor agency offered Gulf of Mexico lease sales with these terms. However, in 2010 that was changed to a 7-year primary term which could be extended for an additional 3 years if the lessee spudded a well within the first 7 years.

After a careful analysis of the past 10 years’ data, for Sale 256, BOEM is reverting to offering the 10-year primary term in these specific water depths. Leases in 1,600 metres of water or deeper will continue to have the full 10-year term as in prior sales.

Lease Sale 256 will be the seventh of the ten scheduled offshore sales under the 2017-2022 Outer Continental Shelf (OCS) Oil and Gas Leasing Program.

The Lease will include approximately 14,755, unleased blocks, located from three to 371.7 kilometres offshore, in the Gulf’s Western, Central, and Eastern planning areas in water depths ranging from three to 3,400 metres.

Excluded from the lease sale are blocks subject to the congressional moratorium established by the Gulf of Mexico Energy Security Act of 2006, blocks adjacent to or beyond the U.S. Exclusive Economic Zone in the area known as the northern portion of the Eastern Gap, and whole blocks and partial blocks within the current boundaries of the Flower Garden Banks National Marine Sanctuary.

The Gulf of Mexico OCS, covering about 160 million acres, is estimated to contain about 48 billion barrels of undiscovered technically recoverable oil and 141 trillion cubic feet of undiscovered technically recoverable gas.

Revenues received from OCS leases – including high bids, rental payments, and royalty payments – are directed to the newly created National Parks and Public Land Legacy Restoration Fund, as well as to the U.S. Treasury, the Land and Water Conservation Fund, the Historic Preservation Fund, and certain Gulf Coast states.

BOEM has included fiscal terms that take into account market conditions and ensure taxpayers receive a fair return for use of the OCS. Terms include a 12.5 per cent royalty rate for leases in less than 200 meters of water depth and a royalty rate of 18.75 per cent for all other leases issued under the sale.