US bidding on offshore leases hits record low: Update
The proceeds from today's sale, which covered acreage in the western Gulf, would be 20pc less than last year and 83pc lower than a 2014 auction, if the offers are certified by the US Bureau of Ocean Energy Management (BOEM).
"We think results are low simply because of low prices," BOEM Gulf regional director director Mike Celata
The lease sale offered access to 23.8mn acres (96,200km2) in the western Gulf planning region, which consists of 4,399 blocks off the coast of Texas in water depths of up to nearly 16,000ft. UK-Australian resources firm BHP Billiton bid \\$10mn to win 12 of the blocks in the auction. BP bid \\$6.3mn for 10 blocks, while ExxonMobil bid \\$1.8mn on two blocks. None of the blocks today received more than one bid.
The number of bids offered today were the lowest total since 1983, the year that BOEM's predecessor agency changed the format of its offshore leasing program so that all the available acreage would be available for bidding each year. The agency previously chose which blocks would be put up for auction.
Bidding for acreage in the Gulf had been strong when crude prices were close to \\$100/bl, a price that helped companies justify the large capital investments needed to develop resources located in hard-to-reach areas. Lease sales in the western and central Gulf raised a combined \\$1.8bn in 2012, \\$1.3bn in 2013 and \\$960mn in 2014.
But industry bidding in offshore acreage dried up after crude prices plunged to below \\$50/bl in 2015. Lease sales for the western and central Gulf raised \\$561mn in 2015 and this year only raised \\$174mn. The auction results today were "relatively modest," said industry group National Ocean Industries Association president Randall Luthi.
Oil industry groups say tougher offshore drilling regulations have also made companies reluctant to bid in the Gulf, along with low oil prices. President Barack Obama's administration earlier this year overhauled offshore drilling regulations in hopes of avoiding well blowouts similar to the one that caused the deadly 2010 Deepwater Horizon explosion and oil spill. BOEM director Abigail Hopper said those regulations were "appropriate" and did not contribute to lower bidding.
BOEM for the first time announced the results of the auction through streaming online video, rather than having the auction open the public. The policy shift came after a large group of climate activists attempted to interrupt a lease sale for acreage in the central Gulf earlier this year.
Today's auction could be the last that specifically leases the western portion of Gulf. BOEM earlier this year proposed to merge the three annual auctions it holds for the western, central and eastern Gulf into a single auction held twice a year. Industry has downplayed the potential benefits of this change, which would double the frequency that industry could bid on a given block.