A sale of oil and gas exploration leases racked up competitive bids Mar. 18 despite the deep dive in oil prices as the bid results were opened.
More than $93 million in winning bids were received by the Bureau of Ocean Energy Management for 71 tracts, with 22 companies participating in Gulf of Mexico Lease Sale 254. It was a sharp drop from Lease Sale 253 in August 2019, when the winning bids totaled more than $159 million (OGJ Online, Aug. 21, 2019).
“While bidding did take a tough hit, it could have been substantially worse due to the unprecedented near-term financial constraints created by the COVID-19 virus and the oil price war between Saudi Arabia and Russia,” said Erik Milito, president of the National Ocean Industries Association, in a statement released after the lease sale.
“Offshore projects are undertaken with the long-term outlook in mind,” Milito said.
As in the last several federal auctions, the action focused on deepwater prospects, especially the Green Canyon and Mississippi Canyon areas. The common assumption has been that the best prospects in shallow waters were drilled many years ago, and once again only a handful of bids came in for blocks in water depths of less than 200 m.
Big companies compete
Four of the largest oil companies dominated the bidding, often competing for the same prizes. Chevron Corp. was the top bidder in terms of aggregate winning bids, at $24.7 million. BHP Ltd. was second at $20 million, followed by Royal Dutch Shell Plc at $18.5 million, and BP Plc at $10.4 million.
Among large oil companies Total SA and Equinor ASA also snapped up some blocks. ExxonMobil Corp. was notable by its absence.
BHP submitted the highest single bid at $11.1 million, topping a competing bid by Shell for Green Canyon Block 80. BHP already participates in Green Canyon oil fields including Shenzi, Atlantis, and Mad Dog.
Chevron offered the second highest bid at $7.28 million for Mississippi Canyon Block 162. There, too, the competing bidder was Shell. A Chevron bid of $5.41 million topped BP in a competition for Viosca Knoll Block 952, another deepwater site
Chevron already participates in Mississippi Canyon oil fields including Ballymore, Blind Faith, and, most recently, the Esox site, where a discovery was announced in October by operator Hess Corp. (OGJ Online, Oct. 29, 2019).
Shell put in the third-highest bid at $6 million for Green Canyon Block 193, where it beat a BP competing bid.
Private equity has become an important element in offshore oil and gas development in recent years, and a small number of privately held companies participated in the latest sale.
EnVen Energy Ventures LLC won a few tracts with big bids—Green Canyon Block 78 with a $2.56 million bid, and Viosca Knoll Block 873 with a $1.41 million bid.
Houston Energy LP and Red Willow Offshore LLC won Walker Ridge Block 151 with a joint $2.12 million bid.
A few other privately held companies also participated, including LLOG Exploration Co. LLC, which has been active for a couple of decades in the Gulf of Mexico.
