Producers show scant interest in western US Gulf

OREANDA-NEWS. August 20, 2015. Oil and gas producers today demonstrated record low interest in the US Interior Department's lease sale for acreage in the western US Gulf of Mexico.

With oil and natural gas prices languishing at some their lowest levels in years, only five producers submitted bids in Lease Sale 246 for blocks in federal waters off the Texas coast. Those companies submitted high bids totaling less than \\$22.7mn for 33 tracts covering 190,080 acres (769km?). Most of the interest was for deepwater acreage, with 21 of the 33 blocks bid on located in water depths greater than 1,600m (5,249ft).

Interior's Bureau of Ocean Energy Management (BOEM) had offered 4,083 blocks covering 21.9mn acres.

BOEM's acting Gulf of Mexico regional director Mike Celata said Interior has never seen such little interest in western Gulf acreage since the federal government launched area-wide offshore leasing in 1983. Last year, 14 companies participated in the western Gulf lease sale, submitting 93 bids for 81 tracts. High bids that year totaled nearly \\$110mn.

Celata said BOEM officials "had expected a lower turnout" this year because of projections about oil prices. The US Energy Information Administration, in its most recent Short-Term Energy Outlook released on 11 August, projected WTI prices will average \\$49/bl this year and \\$54/bl in 2016, down \\$6/bl and \\$8/bl respectively from its forecast in July. And last year, a sale in the eastern Gulf planning area attracted no bids.

BOEM officials took some solace from BHP Billiton's interest in the western Gulf. BHP was high bidder for 26 of the 33 blocks, submitting high bids totaling nearly \\$16.3mn.

Colombia's state-owned Ecopetrol was high bidder on four blocks. US independent Anadarko took three blocks; US independent Peregrine two; and BP one. Ecopetrol submitted the highest bid for a single block, offering \\$2.8mn for East Breaks block 685.

BOEM had offered acreage located between 9-250 nautical miles offshore in water depths ranging from 16-10,975ft (5-3,340m). This was the eighth lease sale held under the 2012-17 offshore leasing program.

BOEM had estimated the sale ultimately could mean the production of 116mn-200mn bl of oil and 538-938Bcf of natural gas. That estimate now appears grossly optimistic.

Offshore industry group the National Ocean Industries Association (NOIA) president Randall Luthi said the sale results "while disappointing" are "not surprising and accurately reflect the current environment of low commodity prices and increasing regulatory changes and uncertainty.

"The entire oil and natural gas industry, particularly the offshore segment, is understandably being very cautious about spending money," Luthi said.