Central GOM lease sale attracts $1.7 billion-plus in high bids

A Central Gulf of Mexico oil and gas lease sale held today attracted more than $1.7 billion in high bids for tracts on the US Outer Continental Shelf offshore Louisiana, Mississippi and Alabama. A total of 56 offshore energy companies submitted 593 bids on 454 tracts covering more than 2.4 billion acres, the US Interior Department announced. The sum of all bids received totaled $2,602,563,726.

The Central Gulf of Mexico Lease Sale 216/222, conducted by the Bureau of Ocean Energy Management (BOEM), offered more than 39 million acres for oil and gas development on the OCS. The acreage included 7,434 tracts from three to more than 230 miles off the coast, in depths ranging from 10 to more than 11,200 ft (3 to 3,400 meters). BOEM estimates the economically recoverable hydrocarbons that could be produced as a result of the acreage offered ranges from 0.8 to 1.6 billion bbl of oil and 3.3 to 6.6 trillion cu ft of natural gas.

This sale follows the December 2011 Western Gulf of Mexico lease sale that made available more than 21 million acres and attracted more than $337 million in high bids and included 20 companies submitting 241 bids on 191 tracts comprising over a million acres offshore Texas.

“Before moving forward with Sale 216/222, we conducted a rigorous analysis of the environmental effects of the Deepwater Horizon oil spill on the Central Gulf of Mexico,” said BOEM director Tommy P. Beaudreau. “We have also continued a number of lease terms designed to ensure fair return to the American people and provide innovative incentives to promote diligent development of our nation’s offshore oil and gas resources.”

Statoil Gulf of Mexico submitted the highest bid on a tract, at$157,111,000 for Mississippi Canyon, Block 718. Shell submitted the highest total amount in bonus bids, $406,594,560 on 24 tracts. Besides Statoil and Shell, other companies who were among the top 10 companies based on the total number of high bids submitted were: Apache Corp, BP, Chevron, Apache Deepwater, Stone Energy Offshore, ConocoPhillips, Arena Energy and ExxonMobil.

Lease terms for both sales included escalating rental rates to encourage faster exploration and development of leases, as well as shorter lease terms for shallower water to encourage timely development. BOEM has increased its minimum bid requirement in deepwater to $100 per acre, up from $37.50 in previous Central lease sales. Historical analysis showed that leases that received high bids of less than $100 per acre have experienced virtually no exploration and development activities.

Lessees will have to comply with a series of important environmental stipulations, including requirements to protect biologically sensitive features, as well as marine mammals and sea turtles, and employ trained observers to ensure compliance and restrict operations when conditions warrant. These terms will help ensure an appropriate balance of responsible resource development with protection of the human, marine and coastal environments.

Each high bid on a tract will now go through an evaluation process within BOEM to ensure the public receives fair market value before a lease is awarded. This is the final Gulf Lease Sale scheduled in the current Outer Continental Shelf Oil and Gas Leasing Program: 2007-2012. Additional information about the lease sale can be found here.