New seismic data that could lead to deepwater hydrocarbon finds is believed to have spurred heightened bidding activity surrounding the Alaminos Canyon block in the western Gulf of Mexico (GoM).

The block, near Shell’s Perdido production hub, captured not only the highest number of bids but also the highest bid during the latest GoM lease sale, which fetched about US $145 million in total bids, the Bureau of Ocean Energy Management (BOEM) revealed Aug. 28. The data, released last summer by WesternGeco, provides better subsalt images and those are believed to have generated renewed interest in the area, BOEM GoM Regional Director John Rodi said.

“We believe that [these] new data did provide a much better image of the prospectivity of the blocks that were part of this survey area,” Rodi said.

Four companies submitted bids for the block, but ConocoPhillips came in with the highest bid of about $30.2 million. The company submitted 21 bids totaling more than $51 million, more than any other company participating in the sale.

In all, 12 companies submitted bids on only 53 of the more than 3,860 blocks offered for oil and gas development during the sale, described by Rodi as predominately deepwater in terms of results. Of the bids submitted, only four were received on blocks in shallow water of less than 200 m (656 ft).

The sale generated about $102 million in high bids.

“I would characterize this [sale] as being a continuation of what we’ve seen in the past in recent years where companies may be bidding on a smaller number of tracts but focusing on those tracts and spending more money on those acquisitions,” Rodi said. He noted that although the number of tracts was low compared to other western GoM sales, the dollar amount on the high bids was far from the bottom. That low came in 1992 when a western GoM lease sale brought in just more than $30 million in bids.

“In the last year there has not been a large amount of new information. There hasn’t been a significant number of new discoveries or successful drilling results in the western GoM that might increase interest in a particular sale,” Rodi said pointing out that seismic data, however, did drive interest in some areas.

Results of the latest sale could be a sign that companies are focusing more on assets at hand.

Since December 2011, there has been more than $3 billion in new acquisitions in the GoM. But, “We believe companies are taking this opportunity to spend some time looking at what they have acquired recently and considering how they want to invest in those properties,” Rodi said. “It’s a dynamics situation where they are constantly looking at new information that may be driving interest in new tracts or acquisitions and balancing that against other tracts that they have in inventory.”

Randall Luthi, president of the National Ocean Industries Association, said costs resulting from regulatory changes, including the proposed production systems safety rule and the anticipated BOP rule, as well as low natural gas prices could have played a role in the results.

“While this sale was not eye-popping and may be closer to a yawner, it shows that interest in deepwater tracts remains strong,” Luthi said in a prepared statement.

Statistics from the sale show most of the bids – 37 totaling about $56 million – were submitted for blocks in water depths between 800 m and 1,600 m (2,625 ft and 5,249 ft). Eleven bids were for blocks in water depths greater than 1,600 m (5,249 ft). Only five bids were submitted for blocks in water depths less than 800 m (2,625 ft).

At least one bid was made on a block in the US-Mexico transboundary area, Rodi said.

He called the sale good under the circumstances, saying, “I think we are continually pleased with the fact that companies are bidding and bidding in the amount that they’re bidding in the GoM.”

Besides ConocoPhillips, other companies participating in the sale and their bids were: Hess Corp., four bids totaling $4 million; Chevron USA, five bids for about $50 million total; ExxonMobil Corp., one bid for $5.8 million; Shell Offshore, one bid for about $4 million; Anadarko US Offshore Corp., five bids totaling about $20 million; Statoil GoM, two bids totaling about $1.5 million; and Maersk Oil GoM, seven bids totaling about $7 million.

Other companies participating included W&T Offshore, Castex Offshore, EnVen Energy Ventures, and Apache Shelf Exploration.

The sale was the third of 12 GoM sales under the Outer Continental Shelf Oil and Gas Leasing Program, which runs through 2017. Total acreage made available in the sale, the second of five Western GoM lease sales as part of the program, paved the way for the possible production of up to 200 MMbbl of oil and 26.6 Bcm (938 Bcf) of gas, according to BOEM estimates.

Contact the author, Velda Addison, at vaddison@hartenergy.com.

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