Despite the buildup of more than a year and a half of anticipation, it was still difficult to get a read on the likely bidding behavior of oil companies as the time came for Western Gulf of Mexico Lease Sale 218 this week.
Pre-sale, there were both favorable and unfavorable signs. Oil prices were high, but only 20 companies submitted bids--the fewest since at least 1996. This was the first lease sale since March 2010, so strong interest could be expected. But it was a Western sale, which is typically smaller and features less attractive acreage offshore Texas than its Central Gulf counterpart, which showcases tracts off Louisiana, Mississippi and Alabama.
Many months of scrutiny, planning, breath-holding and angst had gone into the sale, held December 14 at the Superdome in New Orleans. The Macondo oil spill in April 2010 had caused the US government to first halt all new drilling for a few weeks, then only new wells in deep waters for several months, while it figured out how to make all offshore operations safer.
The result was a slew of new federal mandates and a long lull while operators, drillers and the government attempted to work out the new system of inspections, interfaces, increased paper flow and time management. It had taken a lot of work and caused not a small amount of frustration.
But slowly, things had begun to come back, if not to pre-Macondo normal, then at least to a routine that largely continued to improve along a more dependable track. As the first post-Macondo sale, Western Sale 218 represented the capstone of the process.
And shortly after the sale started came that brief shining and breath-holding moment that signaled the rainbow after the storm.
US Interior Secretary Ken Salazar kicked things off by reading the auction's highest bid: a staggering $103.2 million offer by ConocoPhillips for a strategic deepwater tract, Keathley Canyon block 95.
Not only that, but six other companies also jockeyed for the block with mammoth sums in hand: Chevron, BP, Hess and Shell each made offers from $67 million to $85 million, while Colombia's Ecopetrol tossed in $24.4 million and Maersk, $11.5 million.
After hearing bids like that, you knew things in the Gulf of Mexico would be all right.
The sale's haul wasn't bad for a day's work: the US government took in a total $337.7 million in high bids, and an impressive $712.7 million in total bids from both apparent winners and losers, according to sale sponsor Bureau of Ocean Energy Management.
The $337.7 million high bid total was actually the one of the largest of the last 14 years for a Western sale; in fact, only two other Western auctions since 1998 have topped that amount. But the total bid amount of $712.7 million--both successful and unsuccessful bids--was the biggest amount for a Western sale in nearly three decades, since the $1.26 billion pulled down in 1984's Sale 84.
Salazar left the sale shortly after reading the high bids, but those left behind--oil company bidders, offshore industry representatives and the BOEM--appeared in a very good mood.
"I'm thrilled there was a sale," Randall Luthi, president of the National Ocean Industries Association and a former head of the US Minerals Management Service, BOEM's predecessor, said after the auction. "It finally kicks off the process and ends the uncertainty."
Creative
Commons License
To subscribe or visit go to:
http://www.platts.com
