Oil lease sale western Gulf’s low­est ever in bids, money


The small­est oil lease sale ever in the western Gulf of Mexico and one of the small­est in the en­tire Gulf brought only five bid­ders Wed­nes­day, with low oil prices lim­it­ing in­ter­est in the prospects. Most seats in a Su­per­dome meet­ing room were empty as a fed­eral energy of­fi­cial read the 33 bids for tracts off the Texas coast.

Each tract drew a sin­gle bid, for a to­tal of US$22.7 mil­lion. Not all bids wind up as leases: over the years, nearly 3 per­cent of all bids have been re­jected or with­drawn.

Of­fi­cials had ex­pected in­ter­est to be down from last year be­cause oil prices are so low, said Mike Ce­lata, act­ing re­gional di­rec­tor for the Bureau of Ocean Energy Man­age­ment.

U.S. crude sold for US$41.63 a bar­rel Wed­nes­day, less than half the price a year ago, when 14 com­pa­nies of­fered a bit of com­pe­ti­tion: 93 bids on 81 tracts, for a to­tal of US$109.9 mil­lion in bids and US$109.1 mil­lion on the 80 leases signed.

Ran­dall Luthi, pres­i­dent of the Na­tional Off­shore In­dus­tries As­so­ci­a­tion, said another fac­tor is un­cer­tainty about re­cently pro­posed reg­u­la­tions that are likely to in­crease costs. Those in­clude stronger rules pro­posed for equip­ment de­signed to pre­vent well blowouts and lim­its pro­posed Tues­day for meth­ane emis­sions from oil and gas wells, he said.

Oil is a cycli­cal busi­ness, and re­cent years have seen “thou­sands and thou­sands of lay­offs,” Luthi said.

Twenty-six of Wed­nes­day’s bids were made by BHP Bil­li­ton Petroleum, an arm of BHP Bil­li­ton Ltd. which bid a to­tal of nearly US$16.3 mil­lion.

“In BHP Bil­li­ton, we be­lieve that the Gulf of Mexico has sig­nif­i­cant re­main­ing re­source to be found,” ex­plo­ration pres­i­dent David Rainey said in an email re­layed from Lon­don.

Ce­lata said the com­pany’s bids show “long-term po­ten­tial for oil and gas com­pa­nies to do busi­ness in the Gulf of Mexico.”

Luthi said many of the tracts are in deep wa­ter, re­quir­ing at least a 10-year lease.

A March 18 sale in the far more pop­u­lar cen­tral Gulf of Mexico brought the low­est num­ber of bids since 1986. Of­fi­cials said low oil prices were the rea­son. Since then, the price of U.S. crude has dropped more than US$1.40 a bar­rel.

The wa­ter bot­tom off Louisiana, Mis­sis­sippi and Alabama is about dou­ble the size of the western Gulf, Ce­lata said. Luthi said the tracts off Texas tend to have more nat­u­ral gas, which brings in less money, than those in the cen­tral Gulf.

The sale was the small­est in the western Gulf since 1983, when the Min­er­als Man­age­ment Ser­vice, which was re­or­ga­nized and got a name change af­ter the Deep­wa­ter Hori­zon oil spill, be­gan re­gional sales.

It’s not the small­est Gulf-wide: one off the Florida coast in 2014 and one in the cen­tral Gulf in 2001 got no bid­ders, and one of­fer­ing about one-third as much acreage in the Western Gulf drew three bids in March 2014, with US$21.3 mil­lion in high bids. Two in the eastern Gulf, where drilling is for­bid­den in most ar­eas, drew more bid­ders but less money, US$6.6 mil­lion in 2005 and US$8.4 mil­lion in 2003.

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