Plains Exploration and Production Co. put up the highest bid of $625,000 on the deepest water tract in Western Gulf of Mexico Lease Sale 218. Alaminos Canyon Block 784 is in 10,100 ft (3,061 m) of water.
Out of the 191 tracts receiving bids, 177 were in water depths greater than 1,320 ft. Twenty companies submitted 241 bids on the 191 tracts.
Twenty-four blocks had lease terms of five years, 107 were for seven years and 60 had 10-year terms.
This is the first lease sale following the Macondo accident on April 20, 2010. One aspect of the sale that is sure to get a strong response is that BP Exploration and Production Inc. was the high bidder on 11 tracts for a total of $27.5 million.
Total highs bids for the first offshore lease sale were $337.7 million. Nearly a third of that was bid on a single tract -- $103.2 million for Keithley Canyon 95 -- by ConocoPhillips. The company was the largest bidder in the sale with total high bids of $157.8 million on 75 tracts.
There was a large difference between the highest bid and the second highest. The next highest bid was $8.64 million for Garden Banks 537 by Maersk Oil Gulf of Mexico Two LLC.
The sum of all bids received totaled $712.7 million. Sale 218 was the last remaining sale scheduled in the Western Gulf Planning Area in the 2007-12 Outer Continental Shelf Oil and Gas Natural Gas Leasing Program. The Department of the Interior (DOI) made 3,913 unleased blocks available in the sale. The blocks covered more than 21 million acres and were from nine to about 250 miles offshore in water depths ranging from 16 to more than 10,975 ft.
The last sale in the area was the Western Gulf of Mexico Lease Sale 210, which was held in August 2009. In that sale, 27 companies submitted 189 bids on 27 tracts.
Other high bidders during the Nov. 14 sale included: ExxonMobil Corp., 50 blocks, $63.3 million; Maersk Oil, 12 blocks, $36 million; Anadarko US Offshore Corp., seven blocks, $19.3 million; and Plains E&P, 10 blocks, $12.8 million.
DOI officials were at the sale pointing to how President Barack Obama's administration is both regulating and supporting the industry.
Secretary of the Interior Ken Salazar said, "Today's lease sale, the first since the tragic events of Deepwater Horizon, continues the Obama administration's commitment to a balanced and comprehensive energy plan."
Prior to the sale, four environmental groups filed suit in the U.S. District Court for Washington, D.C., asking for the court to void the sale, claiming that the government failed to take steps to avoid a repeat of the Macondo oil spill.
However, DOI officials said otherwise. "Before moving forward with Sale 218, we conducted a rigorous analysis of the environmental effects of the Deepwater Horizon oil spill on the Western Gulf of Mexico," said Tommy Beaudreau, director, Bureau of Ocean Energy Management (BOEM).
"We also took a fresh look at the economics of leasing and introduced a number of lease terms designed to ensure fair return to the American people, provide incentives to promote diligent development and help reduce the amount of leased acreage that is warehoused and left unexplored," he continued.
Changes in the lease terms are designed to encourage faster exploration and lease development with shorter lease terms for shallower water.
BOEM increased the minimum bid requirement to $100 per acre, up from $37.50. That was expected to put a damper on the lease sale, however, it did not seem to have any effect.
The lease requirements are also tougher regarding the environment. The lessees will have to comply with stipulations that operators have to protect biologically sensitive features as well as marine mammals and turtles. And, the operators must employ trained observers to ensure compliance and restrict operations when conditions warrant.
BOEM stated that each bid will go through a strict evaluation process to ensure that the public receives fair market value before a lease is awarded.
Contact the author, Scott Weeden, at sweeden@hartenergy.com.
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