BOEM Concludes Lease Sale Offshore LA

The U.S. Department of the Interior’s Bureau of Ocean Energy Management (BOEM) held an oil and gas lease sale in March for the Central Gulf of Mexico that drew about $539 million 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 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,” Secretary of the Interior Sally Jewell said. “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.”

The lease sale was part of the Outer Continental Shelf Oil and Gas Leasing Program for 2012-2017 that has offered more than 60 million acres for development, garnering $2.4 billion in bid revenues and awarding 877 leases. The five-year program makes available all offshore areas with the highest resource potential and includes 75% of the nation’s undiscovered, technically recoverable offshore oil and gas resources, the BOEM said.

“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,” Abigail Ross Hopper, director, BOEM, 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.”

The lease sale 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. The BOEM estimated that the sale could result in the production of 460 million to 890 million barrels of oil and 1.9 trillion cubic feet to 3.9 trillion cubic feet of natural gas.

In addition, the lease sale 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 U.S. and Mexico. The BOEM said that those areas are subject to the terms of the U.S. – Mexico Transboundary Hydrocarbon Agreement, which became effective on July 18, 2014. None of those blocks received bids.

The BOEM said that it established the terms for the sale based on an environmental analysis, public comment and consideration of the best scientific information available. Those 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 lease terms also 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.

The BOEM is evaluating the bids to ensure the public receives fair market value before leases are awarded.

Shell Offshore was the top bidder in the lease sale, according to the BOEM. The company had the high bid on 17 blocks, with a sum total of $37.9m.

In a March 19 statement, Shell said that it built on its current portfolio of near- term exploration drill sites within core Miocene and Paleogene plays with bids on the Mississippi Canyon block 896 and Walker Ridge block 375.

Shell said its deep-water Gulf of Mexico portfolio includes the Mars B development, which continues to ramp up production; the ultra-deep-water Stones project, which is under construction; and progress on front-end engineering and design for the Appomattox and Vito projects.

According to the BOEM, other high bidders in the lease sale include Statoil Gulf of Mexico, with 14 high bids totaling $51.4 million; Venari Offshore, with 12 high bids totaling $35.8 million; Chevron USA, with 11 high bids totaling $78.6 million; and Exxon Mobil, with 11 high bids totaling $52.9 million.