Industry sees US Lease Sale 181 as missed opportunity

A US offshore federal lease sale held Wednesday has become a missed opportunity for industry, said an oil trade group. The 233 blocks offered are a quarter of the originally planned sale.

By the OGJ Online Staff

WASHINGTON, DC, Dec. 5 -- A US offshore federal lease sale held Wednesday has become a missed opportunity for industry, said an oil trade group.

The National Ocean Industries Association criticized a decision earlier this year by the Department of Interior to pare back acreage in Lease Sale 181, the first lease sale held in the eastern Gulf of Mexico since 1988.

Seventeen companies bid a total $458.9 million for 95 of the 233 blocks offered in the sale, held Wednesday morning.

"The acreage that was to be included in Lease Sale 181 was cut by nearly 75% earlier this year, even though the deleted tracts were specifically identified for leasing by the previous two administrations because of their importance to the national energy supply," said NOIA.

The White House decided to cut back the sale after the governor of Florida, the president's brother Jeb Bush (R), and Florida lawmakers in Congress said they feared the original parameters of the sale might pose an environmental risk to their coast. Lease sale proponents said the sale would not incur any environmental risk because it was at least 100 miles offshore Florida and was in federal waters.

Even more troubling to NOIA is the fact the area originally designated for leasing is not included in the current administration's Draft Proposed 5-Year Plan for offshore leasing for 2002-2007.

Tom Fry, president of the National Ocean Industries Association, said, "Energy is the oxygen that our economy breathes, and it is the fundamental underpinning of the high quality of American life. By removing key resource areas, which can be rapidly integrated into already existing infrastructure from the 5-Year Plan, the administration is denying itself the flexibility necessary to effectively plan for and manage our energy future. "

He warned that if the current draft plan is approved, producers could not access the disputed area until 2008 at the earliest.

"Placing energy resources off limits at this crucial time of economic and geopolitical uncertainty is tantamount to planning a crisis," Fry said.

For its part, American Petroleum Institute said the sale being held shows the US commitment to developing secure domestic energy sources.

"We are pleased by the robust interest in this sale demonstrated by the oil and natural gas industry," said Betty Anthony, API's upstream general manager.

The sum of the high bids was $340.5 million.

The blocks received an average of two bids each, though six received five bids each. All but one of those were in the De Soto Canyon area.

All of the blocks bid on were in 1,600 m of water or greater, subject to a 10-year lease term at 12.5% royalty.

The deepest block receiving an offer was Lloyd Ridge Block 446 in 2,908 m of water.

Anadarko Petroleum Corp., Houston, bid $26,015,040 for Lloyd Ridge Block 91, the highest bid of the sale. The bid was $4,516.50/acre.

Shell Offshore Inc. was the most active bidder, making offers for 48 blocks. It was highest bidder for 28. Anadarko was a close second in success rate. It bid for 33 blocks and was the highest on 26 of them.

Spinnaker Exploration Co. was the third most active bidder, with 26 offers made. Only eight were high bids, however.

The other companies participating were Kerr-McGee Oil & Gas Corp., Dominion Exploration & Production Inc., Amerada Hess Corp., Chevron USA Inc., Petrobras America Inc., Phillips Petroleum Co., Murphy Exploration & Production Co., EOG Resources Inc., Devon Energy Production Co. LP, Unocal Corp., Pioneer Natural Resources USA Inc., Ocean Energy Inc., and Conoco Inc.

Final results of the sale will be announced after the US Minerals Management Service reviews the bids. The agency can reject bids deemed too low.

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