Shell wins most blocks in Gulf of Mexico offshore sale

Latest offshore oil and gas lease sale in the U.S., held on Wednesday, attracted $244,299,344 in high bids for 227 tracts covering 1,261,133 acres in federal waters of the Gulf of Mexico. Oil giant Shell snapped up the biggest number of blocks, while Norway’s Equinor submitted the highest bid for a single block.

A Gulf of Mexico platform / Image source: BOEM
A Gulf of Mexico platform / Image source: BOEM

The lease sale attracted higher bids compared to previous sessions as Lease Sale 249 in 2017 saw $121 million in high bids, while Lease Sale 250 in 2018 had $124 million in high bids. Lease Sale 251, the last lease sale before Wednesday, had $178 million in high bids.

Thirty oil companies took part in submitting $283,782,480 in all bids including Chevron, Shell, BP, Equinor, Hess, Kosmos, and others. There were 275 bids in total.

The highest single bid was $24,495,776 and came from Norway’s Equinor for Mississippi Canyon/801 block in water depths between 800 and 1600 meters.

The competition was fierce for the block as there were three other bids for it. Overall, Equinor submitted three high bids totaling $29 million.

While Equinor submitted a highest single bid, Shell came on top of the list based on the total number of high bids submitted, submitting 87 high bids for $84,8 million. Shell was followed by Anadarko which had 27 high bids totalling $24 million. Of other oil majors, BP had 23 high bids, Chevron had 8, and Total had two.

Revenues received from OCS leases (including high bids, rental payments and royalty payments) are directed to the U.S. Treasury, certain Gulf Coast states (Texas, Louisiana, Mississippi, and Alabama), the Land and Water Conservation Fund, and the Historic Preservation Fund.

Lease Sale 252 included 14,699 unleased blocks, located from three to 231 miles offshore, in the Gulf’s Western, Central and Eastern Planning Areas in water depths ranging from nine to more than 11,115 feet (three to 3,400 meters).

“The Gulf of Mexico remains a premier basin, covering about 160 million acres. It holds about 48.5 billion barrels of oil and 141 trillion cubic feet of undiscovered and technically recoverable gas,” said Acting BOEM Director Walter Cruickshank. “Today’s lease sale represents another step forward in the Administration’s comprehensive effort to secure domestically produced energy for our Nation’s energy future.”

Lease Sale 252, live-streamed from New Orleans, was the fourth offshore sale held under the 2017-2022 National Outer Continental Shelf Oil and Gas Leasing Program. Under this program, 10 region-wide lease sales are scheduled for the Gulf.

Luthi: If not in U.S., money will go to Guyana, Brazil, Mexico

National Ocean Industries Association (NOIA) President Randall Luthi said the latest lease sale was a way for the Federal government to check the temperature of the offshore industry in the U.S. Gulf of Mexico in the face of the slow pace of recovering commodity prices.

He said: “Lease Sale 252 not only reflects the relatively stable oil prices, but also the efforts by the overall industry to cut costs. Much of the cost cutting has drastically affected service companies, as their profit margin remains thin or non-existent. However, the trajectory of this and the past few sales shows stability and helps establish a new normal for the U.S. offshore industry. Companies continue to shore up existing development operations (in both shallow and deep water) in known geologic areas, but are not yet ready for heavy investment in truly new deepwater projects.”

He further said: “While today’s sale shows that the Gulf of Mexico is still a fundamental basin for energy production and economic growth for the U.S., it also underscores that the Gulf of Mexico is still the ONLY offshore basin available in the U.S. in which U.S. companies may bid. As the global offshore energy recovery heats up, the U.S. must recognize that we are not the only player at the offshore table.

“Other basins in the Western Hemisphere, including Guyana, Brazil and Mexico (not to mention onshore U.S. production) have become magnets for investment dollars. Part I of a recent IHS Markit report confirms that our current federal fiscal structure has rendered the rate of return for U.S. offshore projects, particularly in deepwater areas, less attractive than rates of return in other regions. Policymakers should take note and find new ways to attract and retain global investment dollars in the U.S. Gulf of Mexico, an area that has a long history as the gold standard of offshore energy production.”

Offshore Energy Today Staff