Western US Gulf sale brings in lowest dollar value in 14 years

New Orleans (Platts)--28Aug2013/412 pm EDT/2012 GMT


While Wednesday's Western Gulf of Mexico Lease Sale 233 brought in the lowest dollar total in 14 years, the US Bureau of Ocean Energy Management said it was pleased with the $102.4 million in high bids received. That was down from $133.7 million in last year's Western Gulf sale.

But given that just 61 bids were placed across 53 blocks by 12 oil companies in Sale 233 -- less half the 131 bids on 116 blocks in last year's Western sale -- BOEM Regional Gulf Director John Rodi said he believed the dollar total was "good under the circumstances."

"We're continually pleased ... that companies are bidding the amounts they [offer] in the Gulf of Mexico."

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The relatively small number of bids may signal that companies are taking a breather to assess their holdings, he said. "We believe companies are also taking the opportunity to look at what they've acquired [in recent sales] and how they will invest" in that acreage.

ConocoPhillips offered the highest bid of $30.6 million for a block in ultra-deepwater Alaminos Canyon, besting three rivals, and offered the largest number of apparent high bids -- 29 in all. The largest chunk of those bids were scattered across Alaminos Canyon, some on contiguous blocks, in that fairly remote area that borders Mexican waters and is home to Shell's producing Perdido Hub.

ConocoPhillips in a statement said it also was "pleased" with the sale's outcome. In a statement, the company said it "is strategic with our bids, and we use the opportunity to expand and strengthen our deepwater Gulf of Mexico ... position."

Other companies active in the sale were Chevron, which bid $19 million for East Breaks Block 499 and $13 million for the adjacent EB 500. Neither block attracted competing bids.

Shell, typically a meaningful presence at Gulf of Mexico auctions, placed just one bid -- $4.2 million for AC 772, about 20 miles from Perdido. But that amount was well above Chevron's $2 million offer.

Meanwhile, AC 475, which ConocoPhillips apparently won in Sale 233, was the most vied-for tract of the event with four bidders. A subsidiary of Anadarko Petroleum offered $17.2 million, Chevron offered $14.7 million and ExxonMobil bid $5.8 million for the tract, located in waters more than 1,600 meters deep.

Rodi said a "major factor" the significant interest in Alaminos Canyon was a WesternGeco seismic survey released last year that provides clearer subsalt imaging.

While the dollar value of the sale was the lowest sale total in 14 years, it was not the lowest ever. Western Gulf Sale 174 in 1999 took in $94.2 million although more than triple the number of companies (41) made offers for three times as many blocks (153).

BP, which in November was temporarily banned by the US Environmental Protection Agency from being awarded new federal contracts, including offshore leases, in the wake of the 2010 Macondo spill, did not take part in the sale.

BP earlier this month filed a lawsuit against EPA, charging that the agency's decision unfairly penalized BP and fails to comply with federal law.

Rodi said BP "certainly had the option to bid in" Sale 233. If BP had bid, but was unable to resolve its dispute with the EPA before the federal government's roughly 90-day bid evaluation period, any BP bids would not have been accepted, he said.

In a post-sale statement on Wednesday, BP noted it was the largest leaseholder in the Gulf of Mexico with nearly 700 blocks.

"Due to our extensive portfolio of Gulf acreage and the uncertainty surrounding the suspension and debarment of certain BP businesses, we decided not to participate in this week's lease sale," the statement said. "We hope we can reach a reasonable resolution with regulators so that America's top energy investor over the past five years can once again enter into new contracts with the US government."

At least one bid in Sale 233 was placed on a tract in the US-Mexico trans-boundary area of shared resources between the two countries, Rodi said, but added he could not comment further on the offer. "We're awaiting Congress to make a decision on ratification of an agreement with Mexico" before more information can be released, he said.

--Starr Spencer, starr.spencer@platts.com
--Edited by Jeff Barber, jeff.barber@platts.com

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