BHP Billiton most active in ‘disappointing’ western gulf lease sale

Just 5 companies submitted 33 bids on 33 tracts in Gulf of Mexico western planning area Lease Sale 246, the US Bureau of Ocean Energy Management (BOEM) reported following the event in New Orleans on Aug. 19. The sum of apparent high bids was just $22,675,212.

Those numbers are significantly lower compared with last year’s Lease Sale 238, which drew 93 bids from 14 companies for 81 blocks, totaling $109,951,644 in high bids (OGJ Online, Aug. 20, 2014). Last March’s Lease Sale 235 in the central gulf drew 195 bids from 42 companies over 169 blocks, totaling $539 million in high bids.

Bids in Lease Sale 246 targeted blocks on the East Break, Garden Banks, Alaminos Canyon, Keathley Canyon, and High Island areas. Most bids were on blocks in more than 5,250 ft of water, and most companies sought longer-term leases of 10 years.

East Breaks Block 685 received the highest single bid of $2.8 million from Ecopetrol America Inc., subsidiary of Colombia state-owned Ecopetrol SA. The company overall placed second in both total high bids and sum of high bids at four and $4 million, respectively.

Ecopetrol America submitted four of the five highest overall bids, partnering with Anadarko Petroleum Corp. subsidiary Anadarko US Offshore Corp. on three of them. Anadarko US Offshore was the only other bidder to surpass $1 million, targeting just those three blocks.

The most bidding activity by far came from Australia’s BHP Billiton Petroleum (Deepwater) Inc., a BHP Billiton Ltd. company, with 26 high bids totaling $16.3 million. It targeted deepwater blocks on Keathley Canyon and Alaminos Canyon. BHP was among the most active in last year’s western gulf lease sale as well, placing 14 high bids to total $21.9 million.

BP PLC subsidiary BP Exploration & Production Inc., most active in last year’s western gulf lease sale as apparent high bidder on 27 bids to total $22,837,729, submitted only one bid—albeit the second-highest bid of $878,000—on Keathley Canyon Block 139.

Houston-based Peregrine Oil & Gas Ltd. submitted two high bids totaling $299,000.

Lease Sale 246 offered 4,083 tracts covering about 21.9 million acres from 9-250 miles offshore in 16-10,975 ft of water. BOEM previously estimated the proposed sale could result in production of 116-200 million bbl of oil and 538-938 bcf of natural gas (OGJ Online, Mar. 3, 2015).

Weak market causes ‘disappointing’ sale

“While disappointing, the results of this lease sale are not surprising and accurately reflect the current environment of low commodity prices and increasing regulatory changes and uncertainty,” commented Randall Luthi, president of the National Ocean Industries Association (NOIA), in a release following the event. “The entire oil and natural gas industry, particularly the offshore segment, is understandably being very cautious about spending money.”

Luthi last week urged BOEM to proceed with the sale amid calls for delay from environmental groups (OGJ Online, Aug. 14, 2015).

“Today’s lease sale was quick, quiet, and small, but it is still a step in the right direction and will create jobs, boost economic activity, and strengthen US energy security,” he said. “We are hopeful that policymakers in Washington will acknowledge these benefits and validate their importance to our nation’s economic and energy health by opening up new offshore areas for exploration and development.”

BOEM Director Abigail Ross Hopper echoed Luthi’s thoughts, “While this sale reflects today’s market conditions and industry’s current development strategy, it underscores a steady, continued interest in developing deepwater federal offshore oil and gas resources.”

She affirmed that “the gulf’s long-term value to the nation remains high” despite the “continuing drop in oil prices and low natural gas prices” that “obviously affect industry’s short-term investment decisions.”

Lease Sale 246 was the eighth offshore sale under the Obama administration’s Outer Continental Shelf oil and gas leasing program for 2012-17. The first seven sales offered more than 60 million acres for development and received more than $2.9 billion in bid revenues.

Contact Matt Zborowski at [email protected].