Gulf of Mexico Lease Sale Reflects Today’s Depressed Offshore Market

The Department of the Interior’s latest oil and gas lease sale covering nearly 22 million acres in the western Gulf of Mexico drew little interest from offshore companies on Wednesday, reflecting weakened market conditions driven by the plunge in oil prices.

The Department of the Interior’s Bureau of Ocean Energy Management (BOEM) Lease Sale 46 was held Wednesday at New Orleans’ Superdome and drew bids from 5 offshore energy companies, which together submitted a total 33 high bids on 33 tracts covering about 190,080 acres offshore Texas. The sum of all bids received totaled $22,675,212, the BOEM said.

BOEM Director Abigail Ross Hopper said the sale reflects the current market conditions, but shows continued industry interest in steady development of offshore oil and gas resources.

For comparison, last year’s lease sale covering the Western Gulf of Mexico, held in August, drew bids from 14 and attracted just under $110 million in high bids for 81 tracts covering 433,823 acres. A total of 93 bids were submitted in that auction. 2013’s sale attracted high bids totaling $102 million.

“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 Hopper. “While this sale reflects today’s market conditions and industry’s current development strategy, it underscores a steady, continued interest in developing deep water federal offshore oil and gas resources.”

Lease Sale 246 is the eighth sale held under the Obama Administration’s Outer Continental Shelf Oil and Gas Leasing Program for 2012-2017 (Five Year Program). The first seven sales in the Five Year Program combined have offered more than 60 million acres for development and garnered more than $2.9 billion in bid revenues, with 1,038 leases awarded. 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, according to the BOEM.

Lease Sale 246 offered 4,083 unleased blocks, covering about 21.9 million acres, located from nine to 250 nautical miles offshore in water depths ranging from 16 to more than 10,975 feet (5 to 3,340 meters).

“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,” Hopper said. “The continuing drop in oil prices and 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.”

The bidding companies included units of Anadarko, BHP Billiton, BP, Peregrine Oil & Gas and Ecopetrol America. BHP Billiton Petroleum (Deepwater) had the highest number of high bids with 26 for a total of $16,295,088.

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