Gulf of Mexico lease sale draws strong competition, $264 million in high bids
Offshore Lease Sale 259 drew big oil and gas companies into strong competition Mar. 29, especially for deepwater Gulf of Mexico tracts in the Green Canyon and Keathley Canyon areas.
The sale generated almost $264 million in high bids for 313 exploration tracts covering 1.6 million acres in federal waters of the gulf. The sale offered about 13,600 blocks and drew participation by 32 companies, including an international contingent.
Held by the Bureau of Ocean Energy Management (BOEM), the sale was the first of two scheduled for this year in the gulf. BOEM will hold its next sale in September.
The top competitors in terms of their aggregate winning bids were Chevron Corp. at $108 million, bp plc at $46.6 million, Shell plc at $20.1 million, Equinor ASA at $18.3 million, and ExxonMobil Corp. at $9.78 million.
Other notable winning bidders included Woodside Energy Group Ltd., Anadarko Petroleum Corp., Hess Corp., and Murphy Oil Corp.
Sen. Joe Manchin (D-W.Va.), who negotiated the 2022 legislation that required the lease sale, issued a statement saying he was “glad to see the administration carrying out this mandated gulf oil and gas lease sale that I included in the Inflation Reduction Act.”
Chevron’s big bids
Chevron blew out the competition with at $15.9 million bid for a tract in the Keathley Canyon area, in deep water farther from the coast than most areas. bp offered $4 million for the tract. Chevron, bp, and Shell bid against each other for several other Keathley Canyon tracts, and bp won numerous Keathley tracts where it offered the sole bid.
The Green Canyon area is one of the most productive in the Gulf of Mexico. Chevron offered almost $10.9 million for a Green Canyon tract where Anadarko also bid. Bids of $4.55 million and about $2.3 million by Chevron topped competing bp bids for a couple of other tracts in that area. Chevron’s $3.8 million beat Hess and Anadarko for another tract in the area, and Chevron’s $1.29 million won over a Hess bid in the area.
Hess, Anadarko, and bp won at least one or two competitive Green Canyon tracts, and they and Chevron and others won tracts that only drew a single bid. Notably, Chevron offered $7 million for a tract in the area that drew no other bids.
ExxonMobil avoided the competition by snapping up dozens of tracts clustered in shallow water in the Galveston area and the neighboring High Island area. Justin Rostant, a Wood Mackenzie analyst, said ExxonMobil has plans for a carbon capture and storage (CCS) project in the Houston Ship Channel area, "and these bids are likely in support of that project, but the regulatory process for using oil and gas leases for carbon storage is uncertain."
Deepwater interest
The other companies focused on deep water prospects. Atwater Valley, which borders the prolific Green Canyon and Mississippi Canyon areas, drew strong competition. A $3 million bid from Shell won an Atwater tract against three competing offers, from bp, Chevron, and the joint bid of Anadarko and Murphy Oil.
A joint bid by Anadarko and Murphy Oil topped separate bids by Shell and bp for another Atwater block, while Chevron submitted dozens of uncontested bids for Atwater tracts.
Competition was also fairly strong in the Mississippi Canyon area, where Shell bid beat bp for a tract, and Murphy Oil won a tract over three other bids. Chevron had a strong interest in the Mississippi Canyon area and beat bp for one tract while taking several other tracts without competition, and bp won some uncontested tracts in that area.
One of the highest bids of the sale, at $5 million, came from a joint bid for a Mississippi Canyon tract by Houston Energy LP, Beacon Offshore Energy LLC, Red Willow Offshore LLC, and Westlawn GOM Asset 1 Holdco LLC.
The Garden Banks area, west of Green Canyon, drew many bids, most of them solitary bids for tracts. Shell, Equinor, and bp went after blocks in that area. Shell also grabbed several uncontested tracts in the Desoto Canyon area, east of the Mississippi Canyon.
The Walker Ridge area, as far from the coast as Keathley Canyon, drew many bids from Equinor, Hess, and Chevron. A notable example of smaller competitors in that deep water area came from a consortium of Houston Energy, Beacon Offshore, Red Willow Offshore, and CSL Exploration LP, which bid $2.52 million to win a block that Shell also sought.
