Gulf of Mexico lease sale attracts $583M in bids
The Department of the Interior’s Bureau of Ocean Energy Management (BOEM) yesterday held an oil and gas lease sale for the Central Gulf of Mexico that drew $538,780,056 in high bids for tracts on the U.S. Outer Continental Shelf offshore Louisiana, Mississippi and Alabama.
A total of 42 offshore energy companies submitted 195 bids on 169 tracts, covering about 923,700 acres. The sum of all bids received totaled $583,201,520.
“The Gulf remains a critical component of our nation’s energy portfolio and holds important energy resources that spur economic opportunities for Gulf producing states, creating jobs and home-grown energy and reducing our dependence on foreign oil,” said Secretary of the Interior Sally Jewell, who opened the lease sale. “While this sale reflects today’s market conditions and industry’s current development strategy, it underscores a steady, continued interest in developing these federal offshore oil and gas resources.”
Lease Sale 235 builds on the first six sales held under the Obama Administration’s Outer Continental Shelf Oil and Gas Leasing Program for 2012-2017 (Five Year Program) that offered more than 60 million acres for development, garnered $2.4 billion in bid revenues and awarded 877 leases. The Five Year Program makes available all offshore areas with the highest resource potential and includes 75 percent of the nation’s undiscovered, technically recoverable offshore oil and gas resources.
“As one the most productive basins in the world, the Gulf of Mexico continues to be the keystone of the Nation’s offshore oil and gas resources,” BOEM Director Abigail Ross Hopper said. “The recent drop in oil prices and continued low natural gas prices obviously affect industry’s short-term investment decisions, but the Gulf’s long-term value to the nation remains high and the President’s energy strategy continues to offer millions of offshore acres for development while protecting the human, marine and coastal environments, and ensuring a fair return to the American people.”
Lease Sale 235 offered 7,788 unleased blocks, covering about 41.2 million acres, located from three to 230 nautical miles offshore in water depths ranging from nine to more than 11,115 feet (3 to 3,400 meters). BOEM estimates the sale could result in the production of 460 to 890 million barrels of oil, and 1.9 trillion cubic feet to 3.9 trillion cubic feet of natural gas.
The lease sale also included 201 blocks located, or partially located, within the three statute mile U.S. – Mexico Boundary Area, as well as blocks within the former Western Gap that lie within 1.4 nautical miles north of the Continental Shelf Boundary between the United States and Mexico. These ares are subject to the terms of the U.S. – Mexico Transboundary Hydrocarbon Agreement which entered into force on July 18, 2014. None of those blocks received bids today.
BOEM established the terms for this sale after extensive environmental analysis, public comment and consideration of the best scientific information available. These terms include measures to protect the environment, such as stipulations requiring that operators protect biologically sensitive features as well as providing trained protected species observers. The observers would monitor marine mammals and sea turtles to ensure compliance with protective measures and restrict operations when conditions warrant.
The lease terms include a range of incentives to encourage diligent development and ensure a fair return to taxpayers, including an increased minimum bid for deepwater tracts and escalating rental rates. The leases would also allow a lessee to earn a longer lease term for spudding a well in deeper water or by drilling to a minimum target depth.
Following the lease sale, each bid will go through a strict evaluation process within BOEM to ensure the public receives fair market value before a lease is awarded, DOI has said..
BOEM oversees 160 million acres on the Outer Continental Shelf in the Gulf of Mexico off Texas, Louisiana, Mississippi, Alabama and Florida. About 28.5 million acres (5,279 blocks) are leased for oil and gas development; and 4.6 million of those acres (924 blocks) are producing oil and natural gas.