Western Gulf Sale 229 likely not big, but 'interesting': observers
Houston (Platts)--26Nov2012/648 pm EST/2348 GMT
Judging by the scant number of newly available blocks in the upcoming
Western Gulf of Mexico Lease Sale 229, the lowest in years, the auction this
week probably will not be a barn-burner, analysts say, although one veteran
sale observer said he expected it to be "interesting."
Only 141 such blocks are listed on offer in the sale, scheduled for
Wednesday at the Mercedes-Benz Superdome in New Orleans, versus a sizable 626
newly available blocks in Western Sale 218 in December 2011 and 336 blocks in
Western Sale 210 in August 2009.
The 2010 Western Sale, originally slated for August of that year, was
canceled due to the Macondo oil spill and its aftermath, when the US
government imposed stricter safety regulations on the Gulf and conducted new
environmental impact assessments for future lease sales.
Sale 229 is unlikely to match the nearly $338 million in total high bids
of its predecessor -- the first post-Macondo lease sale. That, observers say,
is because of the smaller number of blocks and because last year's Western
sale was what US Bureau of Ocean Energy Management Gulf of Mexico Regional
Director John Rodi called an "anomalous situation."
"Last year's Sale 218 was the first sale after Macondo, and there was a
lot of pent-up demand since that was the first sale in about two years in the
Western Gulf," Rodi said in an interview with Platts. That sale captured 241
total bids across 191 blocks.
Rodi added that Western Sale 210 in August 2009, which grabbed $115.5
million in total high bids, might be considered a "better" benchmark against
which to gauge the upcoming sale.
But he also noted that 42 newly available blocks, or about 30% of the
141 such tracts offered in Sale 229, are in deep waters of 800 meters or
greater. That is a "healthy" number and tops the proportion of the 2009
Western sale, where 67 or 20% of the 336 newly available blocks were in water
depths of 800 meters and deeper, said Rodi.
"Over time, the sales have been moving to bidding, [that is] more
deepwater-focused," he said, adding Sale 229 will probably continue that
Of the 42 newly available deepwater blocks in Sale 229, some 33 are
nestled in the remote Alaminos Canyon, with just nine tracts sited in the
East Breaks area to the north.
Newly available blocks are those with terms that expired and were
returned by operators in the past year to BOEM, or were handed back early for
other reasons. Because the tracts have been unavailable for years, they are
frequently desirable as operators vie for a fresh look at the geology.
Analysts also doubted this week's sale would be a standout.
"I don't think we'll match [the $338 million] from a year ago," Dean
Eldarragi, senior marine geophysicist for geophysical services provider Gulf
Ocean Services, said. "In fact, I'd be very pleased if we get to 60-70% of
"We're hoping for a good sale, although I don't think it will be
record-breaking," Randall Luthi, president of the National Ocean Industries
Association, said. But "it will be an interesting sale [and] a good indicator
of how much confidence industry has" in the Gulf.
Luthi, director of the Minerals Management Service from mid-2007 until
early 2009, said Sale 229 will be the first sale under the federal
government's new 2012-2017 five-year leasing plan.
Luthi and others said a handful of desirable deepwater blocks could be
focal points, as happened in Sale 218. In that auction, ConocoPhillips stole
the show with a bid of $103.2 million for a deepwater tract in the remote
Keathley Canyon. The second-highest bid was $8.6 million for a tract in
medium depth waters in the Garden Banks area.
Meanwhile, several unleased tracts west of BP's Tiber discovery at
Keathley Canyon block 102, which the major has said might hold up to 3 billion
barrels of oil, could drum up interest, observers said.
The 2009 discovery well, in 4,132 feet of water, was also one of the
deepest wells ever drilled -- at a total depth of 35,055 feet.
ConocoPhillips' $103.2 million bid was for Keathley Canyon block 95, sited
near Tiber, where the company is also a partner.
The tracts surrounding Tiber "are pretty much similar type of prospects,"
Eldarragi said. "I think you're going to see a couple of those in that area
that will receive some attention."
Eldarragi added that available blocks near the Perdido hub, the first
production system to take oil from the Lower Tertiary trend in southern
Alaminos Canyon, also might be targets for larger bidders.
Western Sale 229 will offer more than 3,873 blocks spread across 20
million acres off the coast of Texas, located nine to 250 miles offshore and
in water depths ranging from 16 feet to more than 10,975 feet deep.
--Starr Spencer, email@example.com
--Edited by Keiron Greenhalgh, firstname.lastname@example.org