Independents set the bidding pace during Gulf of Mexico lease Sale 166

Patrick Crow
Energy Policies Editor

Independents were particularly active in the most recent Central Gulf of Mexico offshore lease sale, building on a trend of the past several years.

Bob Armstrong, assistant Interior Secretary for land and minerals, said, "The independents were driving this sale. It (the gulf) has always been the province of the majors, but the independents are in there now."

A total of 103 firms submitted a record 1,790 bids on 1,032 tracts, exposing $1,241,942,374. Apparent high bids totaled $824,055,489, the most since 1985 (OGJ, Mar. 10, 1997, p. 30).

By comparison, at last year's Central Gulf of Mexico sale, 78 companies submitted $520.9 million in high bids on 924 tracts. The Minerals Management Service (MMS) said that unlike sale 157 a year ago, the agency should be able to process the bids within 90 days because it has installed additional computer equipment.

The recent sale was fairly evenly split between shallow and deepwater tracts. Operators bid on 412 tracts in waters up to 200 m, 33 tracts in 200-400 m, 52 tracts in 400-800 m, and 535 tracts in waters of more than 800 m.

There were six bids for the sale's top tract, Mississippi Canyon Block 286. Kerr-McGee Corp. and Agip Petroleum Co. Inc. had the apparent high bid, $8,052,000.

Independents active

Smaller operators didn't restrict their bidding to shallow water tracts. Forest Oil Corp., Denver, said four of the eight blocks on which it was the apparent high bidder are in waters of 500-1,000 ft.

It said it would continue to build a portfolio of deepwater slope prospects to complement its traditional shelf position.

Vastar Resources Inc., Houston, which bid nearly $58 million for 47 tracts, said it succeeded in getting eight of its top 10 prospects on the shelf, and all of or a position in, eight of its top 10 deepwater prospects. It said 15 of its bids on its top 16 prospects were based on and supported with 3D seismic surveys.

Bob Strode, exploration and land vice-president, said, "This was an excellent sale for Vastar. There were many high-quality blocks available on both the shelf and in deepwater. It also was very competitive, and we're pleased that Vastar was successful in winning many key blocks that we feel have significant potential."

Oryx Energy Co. was a partner with Vastar on a number of deep blocks. Oryx said most of the 38 blocks on which it was high bidder were in water depths between 5,800-8,000 ft.

"The attraction of the deepwater blocks include larger potential re- serves, 10-year lease terms, and royalty relief on any new field developments," it said.

Spirit Energy 76, Unocal Corp.'s recently formed U.S. exploration and production business unit, was the apparent high bidder for 73 blocks.

Jack Schanck, Spirit Energy president, said, "Successfully competing for new Gulf of Mexico blocks, particularly in the deep water, is a key element of our long term strategy to grow our domestic reserves and production."

MMS said about 450 persons have attended central gulf sales in recent years, but the Mar. 5 event drew a standing-room-only crowd of about 1,000.

As the sale began, MMS Regional Director Chris Oynes donned a red sport coat and announced, "It's time to go back to an old tradition." The crowd cheered. In the 1980s, former regional director John Rankin sometimes wore a red coat when he thought a sale would be larger than usual.