Another Gulf of Mexico sale sets records

Oil and gas companies submitted a record number of bids on a record number of tracts at a western Gulf of Mexico federal offshore lease sale last week in New Orleans.

In Sale 161, companies submitted 929 bids totaling $503,648,405 for 617 tracts. The total of all apparent high bids was $356.1 million. The former record for a western gulf sale was 773 bids for 436 tracts, set in a 1983 sale that netted total high bids of $1.5 billion.

In Sale 161, Barrett Resources Corp. submitted the highest bid for a tract, $13,006,080 for High Island Block 545A. It is in less than 200 m of water and drew eight bids in all. One other tract drew eight bids, High Island East-South Extension Block 364A.

The offering was the second landmark Gulf of Mexico sale this year. In April, 78 companies submitted a record 1,381 bids for central gulf tracts. Apparent high bids totaled $520.9 million (OGJ, May 6, p. 40).

As in the earlier sale, much of the interest was fueled by a law enacted last November permitting royalty reductions for economically marginal tracts in deep water. More than two thirds of the blocks receiving bids could be affected by the royalty relief law.

The deepest water block receiving a bid was Alaminos Canyon Block 862, in 10,000 ft of water about 156 miles from Port Isabel, Tex.

MMS said 184 tracts in water depths 200 m or less received apparent high bids totaling $124.8 million; in 200-400 m, 40 blocks with high bids of $29.9 million; and in 400-800 m, 72 blocks with high bids of $54.7 million. But in waters deeper than 800 m, companies bid on 321 blocks, and high bids totaled $142.9 million. In all, 73 companies participated in the sale, and 57 submitted bids. The sale offered 5,168 blocks totaling 28.4 million acres, and the 617 blocks receiving bids got an average 1.5 bids/tract.

Shell Offshore Inc. dominated the sale, bidding on 174 tracts and exposing $82.9 million. The second most active firm was Chevron U.S.A. Inc., which exposed $12.5 million for 72 tracts.

Cynthia Quarterman, MMS director, said, "This is the first sale in the western Gulf of Mexico-and only the second sale overall-in which tracts receiving bids in water depths of 200 m or more are eligible for consideration under provisions of the Deepwater Royalty Relief Act.

"This sale, along with the record-breaking central Gulf sale earlier this year, are clear indications that the Gulf of Mexico is embarking on a new era for offshore energy development."

MMS said the highest bid on each tract will be evaluated to assure that it is being sold for fair market value.

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