WESTERN GULF OF MEXICO LEASE SALE DRAWS WEAK RESPONSE

A.D. Koen
Gulf Coast News Editor

Puny participation in last week's federal lease sale for the western Gulf of Mexico reflected a lack of open acreage on attractive prospects and the crisis sweeping the U.S. offshore oil and gas industry.

Thirty-eight companies participating in the Minerals Management Service's Outer Continental Shelf Sale 141 offered 81 bids for 61 tracts in the western gulf planning area. That was the fewest bids offered in a western gulf sale since operators offered 52 bids for 41 tracts at Sale 105 in August 1986.

Companies offered combined bids totaling $36,718,223, including apparent high bids of $30,619,313. Both totals were the lowest in a Gulf of Mexico oil and gas lease sale since MMS began area-wide leasing at Sale 72 in May 1983.

At Sale 105, participants exposed $65.5 million.

The only Gulf of Mexico minerals sale to attract less bonus money was the MMS sulfur and salt sale in the central gulf in February 1988 in which $20.8 million was exposed.

Since participants offered bids totaling $383 million for 488 tracts at Sale 122 in August 1989, leasing activity in western gulf sales has fallen rapidly, to $241 million for 307 tracts at Sale 125 in August 1990 and to $62.6 million for 142 tracts at Sale 135 in August last year.

MMS Director Scott Sewell attributed lack of interest in leasing western gulf acreage to several factors, most notably low U.S. gas wellhead prices.

"The western gulf is predominately a gas prone field," Sewell said. "As consumer demand grows for that safe, clean burning source of energy, we expect increasing industry interest in this critically important area on the OCS."

Sale 141 was the first sale under the U.S. government's new 5 year OCS leasing plan.

SALE SUMMARY

Because of light participation in the sale, individual offers heavily influenced summary lists of leading bids and tracts.

The highest apparent winning bid in Sale 141 was $5,852,300 offered for Matagorda Island Block 636 by Amoco Production Co. 43.5%, Anadarko Petroleum Corp. 37.5%, and Union Pacific Resources Co. 19%. All three companies placed among the sale's top 10 bidders on the strength of the offer.

The bonus offered for Matagorda Island 636 averaged $1,016.03/acre, also highest in the sale. Apparent winning bids sale-wide averaged $91.78/acre.

Amerada Hess Corp. had the largest apparent net exposure among companies taking part in the sale, with seven bids totaling $5,378,910. Shell Offshore Inc., with 10 apparent winning offers, was the sale's most active bidder.

Nearly half the 34 companies that made apparent winning offers had only one high bid, among them: Exxon Corp. with an offer of $147,000 for Garden Banks 425, Fina Oil & Chemical Co. with $149,760 for Garden Banks Block 248, Mobil Producing Texas & New Mexico Inc. with $309,890 for Garden Banks Block 213, Louisiana Land & Exploration Co. with an offer of $152,640 for a 50% interest in High Island Block 206, Coastal Oil & Gas Corp. with $869,760 for Brazos A-106, and Chevron U.S.A. Inc. with $564,000 for Garden Banks Block 212.

Half the companies making the list of top 10 bidders had only one or two winning offers, another indicator of the feeble turnout.

Chevron's bid of $564,000 for Garden Banks Block 212 bested three other offers for the tract. Four bids for Block 212 were the most offered for any tract in the sale. Mustang Island East Addition Block A-65, Galveston Block 191, and Galveston Block 360 each received three bids.

EVIDENCE OF DOWNTURN

The results of Sale 141 were the latest in a series of reports of persistently depressed exploration and development programs in the gulf.

Offshore Data Services Inc.'s Aug. 17 count of active drilling rigs in the gulf showed an average utilization rate of 46.7%, up from less than 40% in June and July but far less than the worldwide utilization rate of 74.7%.

U.S. operators say federal leasing terms and domestic environmental policies discourage offshore E&D.

MMS data show Gulf of Mexico well permits and active exploration and development locations running at slightly more than half the pace of 1991.

Because of the decline of oil and gas leasing and development on the U.S. OCS, Sen. Bennett Johnston (D-La.) has introduced a bill that would reduce the federal royalty on new deepwater production (OGJ, Aug. 10, p. 23).

Offshore Data Services reports Gulf of Mexico operators are either working on or planning six platforms and nine subsea projects in water more than 600 ft deep. But only four deepwater tracts received bids in Sale 141, indicating that U.S. offshore operators need more firm evidence of better incentives before undertaking new high cost deepwater projects.