California Postpones Oil, Gas Lease Auctions

California's Monterey Shale is continuing to be the talk of the industry after the U.S. Bureau of Land Management (BLM) recently announced plans to postpone upcoming federal lease auctions in the state. The prolific play, that holds more shale oil than anywhere else in the country, has the potential to pull the state out of its downward debt spiral but has been caught in a tug of war between proponents and environmentalists since the shale boom occurred in the nation.

The federal land managers postponed an auction scheduled for later this month that would have put more than 1,300 acres of prime public lands up for bids. Another auction scheduled in Colusa County, about 75 miles northwest of Sacramento auctioning about 2,000 acres was put on hold until the end of this year.

"Our priority is processing permits to drill that are already in flight rather than work on new applications," Interior Secretary Sally Jewell told reporters Tuesday after a Senate budget hearing in Washington.

The Monterey Shale, which stretches from Central California down through Southern California is estimated to hold more than 15.4 billion barrels of recoverable crude oil, according to the U.S. Energy Information Administration.

"We want to get the greenhouse gas emissions down, but we also want to keep our economy going," said Governor Jerry Brown (D, California), during a March 13 press conference to discuss the issue. "That's the balance that is required."

The decision to postpone the auctions is loosely based on a recent federal judge ruling that BLM had violated a key environmental law when the energy auctioned the drilling rights for other parcels near the Salinas River Valley. The judge cited that the agency failed to review the impacts on water, wildlife and air quality. A group of environmentalists sued the bureau for not properly reviewing the environmental risks associated with hydraulic fracturing and other types of oil and gas development.

"America has a game changing opportunity to build a stronger economy and to secure a brighter energy future thanks to our vast supplies of newly accessible oil and natural gas," said John Felmy, American Petroleum Institute chief economist in a conference all to reporters Thursday.

"Full development of these resources could mean millions more jobs, stronger and more rapid economic growth, and trillions in added tax revenue, all while strengthening our position vis-à-vis the geopolitics of oil and natural gas markets. Unfortunately, current federal policy continues to prevent our nation from taking full advantage of this opportunity. The most recent example of this is BLM's decision to postpone oil and natural gas lease sales in California until the fall, at the earliest."  

Postponing the leasing auction does not mean that drilling on existing leases will stop, stated BLM spokesman David Christy in a release. The agency is concentrating its limited resources on enforcement on existing leases and other priorities, such as granting renewable energy permits, he said.

With more than 10 years of journalism experience, Robin Dupre specializes in the offshore sector of the oil and gas industry. Email Robin at rdupre@rigzone.com.

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California Postpones Oil, Gas Lease Auctions

California's Monterey Shale is continuing to be the talk of the industry after the U.S. Bureau of Land Management (BLM) recently announced plans to postpone upcoming federal lease auctions in the state. The prolific play, that holds more shale oil than anywhere else in the country, has the potential to pull the state out of its downward debt spiral but has been caught in a tug of war between proponents and environmentalists since the shale boom occurred in the nation.

The federal land managers postponed an auction scheduled for later this month that would have put more than 1,300 acres of prime public lands up for bids. Another auction scheduled in Colusa County, about 75 miles northwest of Sacramento auctioning about 2,000 acres was put on hold until the end of this year.

"Our priority is processing permits to drill that are already in flight rather than work on new applications," Interior Secretary Sally Jewell told reporters Tuesday after a Senate budget hearing in Washington.

The Monterey Shale, which stretches from Central California down through Southern California is estimated to hold more than 15.4 billion barrels of recoverable crude oil, according to the U.S. Energy Information Administration.

"We want to get the greenhouse gas emissions down, but we also want to keep our economy going," said Governor Jerry Brown (D, California), during a March 13 press conference to discuss the issue. "That's the balance that is required."

The decision to postpone the auctions is loosely based on a recent federal judge ruling that BLM had violated a key environmental law when the energy auctioned the drilling rights for other parcels near the Salinas River Valley. The judge cited that the agency failed to review the impacts on water, wildlife and air quality. A group of environmentalists sued the bureau for not properly reviewing the environmental risks associated with hydraulic fracturing and other types of oil and gas development.

"America has a game changing opportunity to build a stronger economy and to secure a brighter energy future thanks to our vast supplies of newly accessible oil and natural gas," said John Felmy, American Petroleum Institute chief economist in a conference all to reporters Thursday.

"Full development of these resources could mean millions more jobs, stronger and more rapid economic growth, and trillions in added tax revenue, all while strengthening our position vis-à-vis the geopolitics of oil and natural gas markets. Unfortunately, current federal policy continues to prevent our nation from taking full advantage of this opportunity. The most recent example of this is BLM's decision to postpone oil and natural gas lease sales in California until the fall, at the earliest."  

Postponing the leasing auction does not mean that drilling on existing leases will stop, stated BLM spokesman David Christy in a release. The agency is concentrating its limited resources on enforcement on existing leases and other priorities, such as granting renewable energy permits, he said.

With more than 10 years of journalism experience, Robin Dupre specializes in the offshore sector of the oil and gas industry. Email Robin at rdupre@rigzone.com.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

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California Postpones Oil, Gas Lease Auctions

California's Monterey Shale is continuing to be the talk of the industry after the U.S. Bureau of Land Management (BLM) recently announced plans to postpone upcoming federal lease auctions in the state. The prolific play, that holds more shale oil than anywhere else in the country, has the potential to pull the state out of its downward debt spiral but has been caught in a tug of war between proponents and environmentalists since the shale boom occurred in the nation.

The federal land managers postponed an auction scheduled for later this month that would have put more than 1,300 acres of prime public lands up for bids. Another auction scheduled in Colusa County, about 75 miles northwest of Sacramento auctioning about 2,000 acres was put on hold until the end of this year.

"Our priority is processing permits to drill that are already in flight rather than work on new applications," Interior Secretary Sally Jewell told reporters Tuesday after a Senate budget hearing in Washington.

The Monterey Shale, which stretches from Central California down through Southern California is estimated to hold more than 15.4 billion barrels of recoverable crude oil, according to the U.S. Energy Information Administration.

"We want to get the greenhouse gas emissions down, but we also want to keep our economy going," said Governor Jerry Brown (D, California), during a March 13 press conference to discuss the issue. "That's the balance that is required."

The decision to postpone the auctions is loosely based on a recent federal judge ruling that BLM had violated a key environmental law when the energy auctioned the drilling rights for other parcels near the Salinas River Valley. The judge cited that the agency failed to review the impacts on water, wildlife and air quality. A group of environmentalists sued the bureau for not properly reviewing the environmental risks associated with hydraulic fracturing and other types of oil and gas development.

"America has a game changing opportunity to build a stronger economy and to secure a brighter energy future thanks to our vast supplies of newly accessible oil and natural gas," said John Felmy, American Petroleum Institute chief economist in a conference all to reporters Thursday.

"Full development of these resources could mean millions more jobs, stronger and more rapid economic growth, and trillions in added tax revenue, all while strengthening our position vis-à-vis the geopolitics of oil and natural gas markets. Unfortunately, current federal policy continues to prevent our nation from taking full advantage of this opportunity. The most recent example of this is BLM's decision to postpone oil and natural gas lease sales in California until the fall, at the earliest."  

Postponing the leasing auction does not mean that drilling on existing leases will stop, stated BLM spokesman David Christy in a release. The agency is concentrating its limited resources on enforcement on existing leases and other priorities, such as granting renewable energy permits, he said.

With more than 10 years of journalism experience, Robin Dupre specializes in the offshore sector of the oil and gas industry. Email Robin at rdupre@rigzone.com.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

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BOEM to Offer Over 21 Million Acres in Western Gulf Lease Sale

The Bureau of Ocean Energy Management (BOEM) will offer over 21 million acres offshore Texas for exploration and production in Lease Sale 233 in August.

The acreage, which includes 3,953 blocks located 9 to 250 miles offshore in water depths ranging from 16 to over 10,975 feet (5 to 3,346 meters), will include all available unleased areas in the western Gulf planning area.

The proposed sale is the third offshore auction under the current Outer Continental Shelf Oil and Gas Leasing Program for 2012 to 2017. The first sale under the plan, Western Gulf Lease Sale 229, was held in November 2012 and netted nearly $134 million in high bids. The second sale, Central Gulf Lease Sale 227, was held last month, and attracted over $1.2 billion in high bids.

BOEM estimates the sale could generate production of 116 to 200 million barrels of oil and 538 to 938 billion cubic feet of natural gas.

The proposed economic terms for the sale will not include the provision for deep gas royalty relief under the Energy Policy Act of 2005 (EPAct), which will end May 3. However, ultra-deep gas royalty relief required under the EPAct will still be available, BOEM said in a statement.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

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BOEM to Offer Over 21 Million Acres in Western Gulf Lease Sale

The Bureau of Ocean Energy Management (BOEM) will offer over 21 million acres offshore Texas for exploration and production in Lease Sale 233 in August.

The acreage, which includes 3,953 blocks located 9 to 250 miles offshore in water depths ranging from 16 to over 10,975 feet (5 to 3,346 meters), will include all available unleased areas in the western Gulf planning area.

The proposed sale is the third offshore auction under the current Outer Continental Shelf Oil and Gas Leasing Program for 2012 to 2017. The first sale under the plan, Western Gulf Lease Sale 229, was held in November 2012 and netted nearly $134 million in high bids. The second sale, Central Gulf Lease Sale 227, was held last month, and attracted over $1.2 billion in high bids.

BOEM estimates the sale could generate production of 116 to 200 million barrels of oil and 538 to 938 billion cubic feet of natural gas.

The proposed economic terms for the sale will not include the provision for deep gas royalty relief under the Energy Policy Act of 2005 (EPAct), which will end May 3. However, ultra-deep gas royalty relief required under the EPAct will still be available, BOEM said in a statement.

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Musings: The Gulf of Mexico Is Back Based On Lease Sale Results

Two weeks ago the Department of the Interior reported the results of the Central Gulf of Mexico lease sale 227, which, based on the total amount of money oil and gas companies bid, suggested the industry is bullish on prospects in this region. As usual, the media focused on the total dollar figures and the bidding intensity among companies over a few tracts, but it may have missed some of the underlying trends that are shifting and will shape the Gulf's future.

The media focused on the total dollar figures and the bidding intensity among companies over a few tracts

Some 52 oil and gas companies submitted 407 bids on 320 tracts offered by the government. BP plc did not submit a bid, although they were told by the Interior Department that they could. BP is currently prohibited from securing government contracts due to the settlement terms of the Macondo oil spill. The Interior Department told BP they could submit a bid and after a review would be informed whether they were able to be awarded the tract. We assume BP declined to invest the time and effort in what was likely to be nothing more than an exercise. What we don't know is whether BP bid as a partner with others, although their legal status could impact the award status. The 320 tracts bid on represented only 4.5% of all the tracts offered, which was the smallest percentage since 2001, as shown in Exhibit 6 on the next page.

The 320 tracts bid on represented only 4.5% of all the tracts offered, which was the smallest percentage since 2001

When the results of the sale are examined from the perspective of the total number of tracts bid on, the post-2000 period has generally demonstrated a downward trend, although there have been some very successful lease sales such as in 2007 and 2008. Those years appear to have been an aberration from the general trend of bidding in a mature oil and gas province. The high sale results were consistent with the speculative fever that gripped the U.S. and global economy immediately prior to the 2008 financial crisis.

BOEM altered some of the terms of the lease bids from prior sales

Federal officials, such as Interior Secretary Ken Salazar and Bureau of Ocean Energy Management (BOEM) Director Tommy Beaudreau, cheered the results of the sale, and pointed out that comparisons of this Central Gulf of Mexico sale to the prior one in 2012 should be made with caution since the prior sale reflected pent-up industry demand due to the absence of a sale in 2011 following the Macondo oil spill. Additionally, BOEM altered some of the terms of the lease bids from prior sales. Deepwater acreage minimum bids were boosted to $100 per acre compared to prior sale amounts of only $37.50 an acre. The minimum bid hike came following extensive analysis by BOEM showing that deepwater leases with high bids of less than $100 per acre experienced virtually no exploration and development. The deepwater tracts leased in this sale also carried escalating rental rates and tiered durational terms with relatively short base periods followed by additional time under the same lease if the operator drills a well during the initial period. This is the federal government's attempt to make sure that acreage leased offshore is drilled rather than becomes a Congressional talking point whenever gasoline prices soar about how many idle offshore leases the oil industry holds.

Extensive analysis conducted in the mid-1980s showed that between 1974 and 1984, the industry always acquired lease acreage that was never drilled

While we have not seen the BOEM analysis, we would be cautious about interpreting the data. Since the federal government shifted its offshore leasing program to area-wide lease sales in 1983, oil and gas companies have often purchased acreage with minimum bids as they attempt to lock up sufficient acreage spreads to cover geological/exploration theories they planned to test. Extensive analysis conducted in the mid-1980s showed that between 1974 and 1984, the industry always acquired lease acreage that was never drilled. That analysis shocked many in the industry who had always assumed that, prior to the introduction of area-wide leasing, all the acreage ever leased offshore was drilled. The practice of not drilling all leased tracts mushroomed once the industry was freed from the "nomination process for identifying acreage to be leased" in order to test unconventional geologic theories. If the theory proved wrong with a test well, then multiple tracts were often condemned and never drilled. We tend to believe that the shift to area-wide leasing in the Gulf and away from the acreage nomination system previously in effect contributed to the successful development of sub-salt plays, Lower Tertiary plays and the entire deepwater phenomenon.

We attribute this consistency to the exploration philosophy of the modern oil and gas industry that companies are in the business of replacing and growing their reserves and production and they must continue to reinvest in the business every year if they expect to remain in business long-term

A measure we follow when attempting to assess the success of a Gulf of Mexico lease sale is the ratio of bids made to tracts bid on. We have examined this ratio going back to the very first Central Gulf sale but more importantly since area-wide lease sales began in 1983. Exhibit 8 shows the tracts bid on, the number of bids made and the ratio of those figures for each Central Gulf sale since 1983. The sale results should be read from right to left, but what they show is how relatively consistent the ratio has been over this 30-year period. With commodity prices rising and falling and the fortunes of the industry ebbing and flowing, one might have expected greater variability in the bids-to-tracts trend. We attribute this consistency to the exploration philosophy of the modern oil and gas industry that companies are in the business of replacing and growing their reserves and production and they must continue to reinvest in the business every year if they expect to remain in business long-term. This investment trend goes counter to the "speculator" view of oil company managements. Under that theory, oilmen would not be bidding during periods when oil prices were high and rising but would only bid when commodity prices were low. Yes, high oil prices, which provide incremental cash flows for the companies, are often the justification for accumulating greater exploration acreage inventory than when industry times are lean. But the stability of the bids-to-tracts ratio suggests greater, and more consistent, financial discipline than the speculator thesis.

The shallow Gulf of Mexico segment may be on the cusp of a revival after having been ‘left for dead’ by the emergence of the shale revolution onshore

The most notable figures to come from the lease sale results were the number of bids in deep and shallow water depths. According to data from BOEM, there were 131 bids for tracts located in water depths of 1,600 meters of water depth or greater but 85 bids for tracts in less than 200 meters of water depth. Those figures suggest to us that the shallow Gulf of Mexico segment may be on the cusp of a revival after having been 'left for dead' by the emergence of the shale revolution onshore. If accurate, it means better times for many of the more traditional domestic suppliers of offshore oilfield services. It has been the absence of activity in shallow water that has retarded the Gulf of Mexico recovery, but that may be about to change.

G. Allen Brooks works as the Managing Director at PPHB LP. Reprinted with permission of PPHB.

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Apache Confirms 14 Blocks from Gulf of Mexico Lease Sale

Apache Corporation announced that its subsidiaries were the apparent high bidders on nine shallow water blocks and five deepwater blocks in the recent Gulf of Mexico (GOM) lease sale held by the U.S. Department of the Interior's Bureau of Ocean Energy Management. Lease Sale 227, held March 20 in New Orleans, received 407 bids from 52 companies on 320 tracts, with the high bids totaling more than $1.2 billion.

On the continental shelf, Apache was the sole bidder on all nine blocks where it submitted bids. The company partnered on seven blocks in the Main Pass area, forming a new joint venture with Apache as the operator and holding a 75-percent working interest. The JV is currently shooting seismic over a 633,000-acre area using new wide azimuth technology to collect data and images under and around salt dome structures.

The company holds a 100-percent working interest in its two other shelf leases acquired in the sale. Apache is currently the largest leaseholder on the Gulf of Mexico's continental shelf with interests in more than 500 blocks.

In the deepwater, Apache was high bidder on five of nine bids, with a 50-percent working interest in each lease. Leases were acquired in the DeSoto Canyon, Green Canyon and Mississippi Canyon lease areas, growing the company's prospect inventory with properties near existing industry discoveries. With the exception of one block, all bids were competitive with other GOM operators.

Overall, the company's net exposure for its winning bids was $2.2 million for the shelf and $24.6 million for deepwater blocks.

"With new acreage, new investments and new ideas, we expect that the Gulf of Mexico will continue to generate strong cash flows and excellent returns," said Jon Jeppesen, executive vice president.

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CEA Offers Remarks Ahead of Lease Sale Hearings

This week, Consumer Energy Alliance (CEA) will participate at public hearings in Tallahassee and Panama City Beach hosted by the federal Bureau of Ocean Energy Management (BOEM), which is a division within the U.S. Department of the Interior. BOEM has completed a draft environmental impact statement for two proposed oil and gas lease sales in the Gulf of Mexico's Eastern Planning Area and is seeking public comment on the document.

Lease Sales 225 and 226, scheduled for 2014 and 2016, are part of the Outer Continental Shelf Oil and Gas Leasing Program:2012-2017 (Five Year Program). The Five Year Program makes all areas with the highest-known resource potential available for oil and gas leasing in order to further reduce America's dependence on overseas oil.

BOEM is holding public hearings to solicit comments on the environmental impact statement from interested citizens and organizations. Comments will be used to prepare the final environmental impact statement for these proposed Eastern Planning Area oil and gas lease sales. Three hearings will be held: on Tuesday, March 26, in Tallahassee at 1:00 p.m. EST at the Hilton Garden Inn, 1330 Blairstone Road; and on Wednesday, March 27, in Panama City Beach at 1:00 p.m. CST and again at 6:00 p.m. CST at the Wyndham Bay Point Resort, 4114 Jan Cooley Drive.

Consumer Energy Alliance-Florida Executive Director Kevin Doyle prepared the following comments for the Tallahassee and Panama City Beach public hearings:

"As an advocate for consumers, CEA supports offshore energy exploration and production in the eastern planning areas of the Gulf of Mexico. While CEA encourages the development of renewable energy resources, we believe that continued and expanded oil and gas exploration and production is vital to maintaining a reliable energy supply for consumers, reducing our dependence on oil imports, and growing the economy. Utilizing all available domestic oil and gas resources will bring energy prices down for all American consumers and businesses – allowing them to save money, grow their businesses, and create jobs. "

In addition to creating jobs, offshore oil and gas development provides substantial government revenue through an expanded tax base and royalty payments. In 2009, offshore oil and gas activity in the Gulf of Mexico generated almost $70 billion of economic value and nearly 400,000 jobs. That same year, the industry provided about $20 billion in revenues to federal, state and local governments through royalties, bonuses and tax collections. According to Wood Mackenzie, oil and natural gas development in the Eastern Gulf of Mexico could create 100,000 new jobs in Florida alone.

In 2012, the United States consumed 18.5 million barrels of petroleum products a day, making the U.S. one of the world’s largest petroleum consumers. The United States consumes more energy from petroleum than from any other energy source. Future Eastern Gulf of Mexico energy exploration and production could add significant domestic supplies to help offset the need for overseas imports. It is important that we allow access now because it will years to explore and develop the energy before it can be delivered to consumers.

The Environmental Impact Statement concludes that any environmental impact from offshore oil and gas development in these proposed areas would be minimal if all existing regulatory requirements are met. In the draft EIS, the BOEM examines the potential impact to water quality, air quality, wetlands, marine life, and coastal barriers, among other areas, and each time concludes that given the type and level of activity anticipated, the local environment will not be adversely affected. The draft EIS notes that myriad advancements in technology, practice and regulation following the 2010 Deepwater Horizon spill will further minimize the potential impact of offshore oil and gas development.

Consumer Energy Alliance encourages the Bureau of Ocean Energy Management to proceed in a way that allows for the greatest economic benefit to American energy consumers. This means significant access to the eastern planning areas of the Gulf of Mexico for safe and responsible energy exploration and production. Thank you again for allowing us to be here today.

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CEA Offers Remarks Ahead of Lease Sale Hearings

This week, Consumer Energy Alliance (CEA) will participate at public hearings in Tallahassee and Panama City Beach hosted by the federal Bureau of Ocean Energy Management (BOEM), which is a division within the U.S. Department of the Interior. BOEM has completed a draft environmental impact statement for two proposed oil and gas lease sales in the Gulf of Mexico's Eastern Planning Area and is seeking public comment on the document.

Lease Sales 225 and 226, scheduled for 2014 and 2016, are part of the Outer Continental Shelf Oil and Gas Leasing Program:2012-2017 (Five Year Program). The Five Year Program makes all areas with the highest-known resource potential available for oil and gas leasing in order to further reduce America's dependence on overseas oil.

BOEM is holding public hearings to solicit comments on the environmental impact statement from interested citizens and organizations. Comments will be used to prepare the final environmental impact statement for these proposed Eastern Planning Area oil and gas lease sales. Three hearings will be held: on Tuesday, March 26, in Tallahassee at 1:00 p.m. EST at the Hilton Garden Inn, 1330 Blairstone Road; and on Wednesday, March 27, in Panama City Beach at 1:00 p.m. CST and again at 6:00 p.m. CST at the Wyndham Bay Point Resort, 4114 Jan Cooley Drive.

Consumer Energy Alliance-Florida Executive Director Kevin Doyle prepared the following comments for the Tallahassee and Panama City Beach public hearings:

"As an advocate for consumers, CEA supports offshore energy exploration and production in the eastern planning areas of the Gulf of Mexico. While CEA encourages the development of renewable energy resources, we believe that continued and expanded oil and gas exploration and production is vital to maintaining a reliable energy supply for consumers, reducing our dependence on oil imports, and growing the economy. Utilizing all available domestic oil and gas resources will bring energy prices down for all American consumers and businesses – allowing them to save money, grow their businesses, and create jobs. "

In addition to creating jobs, offshore oil and gas development provides substantial government revenue through an expanded tax base and royalty payments. In 2009, offshore oil and gas activity in the Gulf of Mexico generated almost $70 billion of economic value and nearly 400,000 jobs. That same year, the industry provided about $20 billion in revenues to federal, state and local governments through royalties, bonuses and tax collections. According to Wood Mackenzie, oil and natural gas development in the Eastern Gulf of Mexico could create 100,000 new jobs in Florida alone.

In 2012, the United States consumed 18.5 million barrels of petroleum products a day, making the U.S. one of the world’s largest petroleum consumers. The United States consumes more energy from petroleum than from any other energy source. Future Eastern Gulf of Mexico energy exploration and production could add significant domestic supplies to help offset the need for overseas imports. It is important that we allow access now because it will years to explore and develop the energy before it can be delivered to consumers.

The Environmental Impact Statement concludes that any environmental impact from offshore oil and gas development in these proposed areas would be minimal if all existing regulatory requirements are met. In the draft EIS, the BOEM examines the potential impact to water quality, air quality, wetlands, marine life, and coastal barriers, among other areas, and each time concludes that given the type and level of activity anticipated, the local environment will not be adversely affected. The draft EIS notes that myriad advancements in technology, practice and regulation following the 2010 Deepwater Horizon spill will further minimize the potential impact of offshore oil and gas development.

Consumer Energy Alliance encourages the Bureau of Ocean Energy Management to proceed in a way that allows for the greatest economic benefit to American energy consumers. This means significant access to the eastern planning areas of the Gulf of Mexico for safe and responsible energy exploration and production. Thank you again for allowing us to be here today.

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'Extremely Successful' Lease Sale Garners $1.6B in Total Bids

The deepwater Gulf will remain a cornerstone of U.S. domestic energy portfolio for "many years to come," Acting Assistant Secretary for Land and Minerals Management and Bureau of Ocean Energy Management Director (BOEM) Tommy Beaudreau praised after the results of Central Gulf of Mexico Lease Sale 227.

Central Gulf of Mexico Lease Sale 227 garnered total bids of $1.6 billion and high bids of $1.2 billion. Fifty-two oil and gas companies took part in Lease Sale 227, which Gulf of Mexico Regional Director John Rodi said ranked in the Top Ten of lease sales in terms of high bids since leasing began in 1983.

Beaudreau thanked the oil and gas industry for its continued interest in the central Gulf, and Rodi said the recent drilling success seen in the Gulf indicates the present and future value of the Gulf of Mexico.

Statoil Gulf of Mexico LLC and Samson Offshore LLC bid $81.8 million for Walker Ridge Block 271, the highest bid received in the lease sale.

Bidding results presented a significant indication of continued interest in the deepwater Gulf. Rodi attributed the interest in deepwater to new seismic data that has been made available and successful drilling results seen in the Gulf of Mexico over the past year. The focus on the deepwater Gulf – which is more costly and requires more focus on exploration and development plans – may be a reason for a lower level of bidding seen since the previous lease sale.

BOEM received 407 bids submitted by 47 companies on 320 offshore blocks in Central Gulf of Mexico Lease Sale 227. The sale acreage includes 7,299 blocks and covers approximately 38.6 million acres, located from three to about 230 nautical miles offshore in water depths ranging from 9 to over 11,115 feet (3 to 3,400 meters).

BOEM estimates the lease sale could result in the production of .46 billion to .89 billion barrels of oil, and 1.9 trillion cubic feet to 3.9 trillion cubic feet of natural gas.

BP plc did not directly submit bids in Wednesday morning's sale, but might have possibly partnered on a bid. BP was permitted to bid in the lease sale, but due to a suspension imposed last November by the U.S. Environmental Protection Agency from obtaining new oil drilling leases and other new contracts with the federal government, the company would not have been awarded a lease.

Despite its decision not to participate in the lease sale, the company intends to continue investing at least $4 billion annually in the region over the next decade, maintaining its position as the largest investor and leaseholder in the region. BP holds leases on nearly 700 Gulf of Mexico blocks, and currently has seven rigs operating in the Gulf. The deepwater Gulf also remains a core area for BP globally.

"We hope we can reach a reasonable resolution with regulators so that America's top energy investor over the past five years can once again enter into new contracts with the U.S. government," said Geoff Morrell, BP's head of U.S. communications, in an email statement to Rigzone.

Secretary of the Interior Ken Salazar called the lease sale a "historic day" and part of the Department of the Interior's (DOI) plan to implement President Obama's "all of the above" energy strategy. However, preliminary sale information indicates the number of tracts and acres receiving bids is down almost 30 percent versus last year's offering and nearly 40 percent compared with the average of the prior five sales, according to a March 19 analyst note from GHS Research.

GHS Research analysts attributed the decline to:

a 16 percent reduction in participants versus the 2012 sale and a 37 percent decline compared with the average of the prior five salesan 18 percent decline in the number of bids per participant versus last year and a 23 percent decline relative the previous five sales

Pent-up demand also may have been a factor in the higher level seen in the previous central Gulf lease sale since it was the first following the 2010 Macondo incident. Central Gulf Lease Sale 216/222, held in June 2012, resulted in $2.6 billion in total bids and $1.7 billion in high bids. Fifty-six companies bid on 454 blocks out of the 7,434 blocks that were offered.

"I do think there is a significant amount of acreage already under lease and robust exploration activity underway throughout the Gulf of Mexico," Salazar said in an earlier conference call with reporters Wednesday, noting that more rigs are operating in the Gulf of Mexico today before the Macondo incident in 2010.

Seventy-one jackups, semisubmersibles and drillships are under contract in the Gulf of Mexico as of March 20, up slightly from the 70 rigs under contract as of April 19, 2010, according to data from Rigzone's RigLogix database. Thirty-eight semisubs and drillships are currently under contract in the region, up from 34 under contract as of April 19, 2010.

Operators' sharpened focus on the Gulf's deepwater acreage also may be another factor in the lower level compared to the previous central Gulf sale.

"Companies may not bid as much but they hone in on selective acreage," said Beaudreau.

Since Macondo, DOI has undertaken an unprecedented overhaul of federal oversight into federal exploration and raised standards, Beaudreau commented.

"We've raised standards with respect to industry, and this activity is conducted more safety and responsibly," Beaudreau told reporters. "We've seen the benefits of that with strong investment in the Gulf of Mexico."

BOEM has been able to raise these standards thanks to funding that has allowed the agency to hire additional staff. The additional workers have not only allowed BOEM to implement heightened standards, but increase the efficiency and speed of the plan review and permitting process while not cutting corners.

"We've seen tremendous progress over the last year and a half," Beaudreau told reporters in a conference call. "The fundamental lesson we drew from the MMS [Minerals Management Service] was that it was a severely underfunded agency."

However, Beaudreau fears that the sequester – which means that BOEM staffers now have limited overtime – may prolong the time period on plan reviews.

"The BOEM and BSEE [Bureau of Safety and Environmental Enforcement] are can do agencies, but now we have the fiscal constraints we have to continue with," Beaudreau said, calling the funding limits imposed by the sequester "an extremely unfortunate situation."

Salazar said he was proud of the fact that the United States now imports less than 40 percent of the oil it consumes – a dramatic change from a few years ago. He noted that that a member of Iraq's oil ministry was on hand for the lease sale to learn more about the U.S. resource bidding process.

While BOEM recently announced plans for wind energy development offshore Virginia, no mid or south-Atlantic acreage is scheduled for bidding at this time. Beaudreau said BOEM has been working with the Department of Defense to identify offshore areas where military traffic might conflict with future oil and gas exploration. BOEM announced March 14 that a wind energy research lease was issued to Virginia's Department of Mines Minerals and Energy.

GHS anticipates a shift from exploration to development drilling to monetize discoveries such as Anadarko's recently announced Shenandoah-2 results in the deepwater Gulf of Mexico, which hit over 1,000 feet of net oil pay in multiple high-quality Lower Tertiary-aged reservoirs, will pick up following nearly a 70 percent/30 percent exploration/development split in recent years, "thus we are neither surprised nor concerned with a weak showing for new exploration."

Industry associations praised the lease sale results, but called for new areas of the U.S. Outer Continental Shelf (OCS) to be opened for exploration.

National Ocean Industries Association (NOIA) President Randall Luthi said the enthusiasm evident in the sale "confirms a continuing positive trend for the offshore industry in the Gulf of Mexico" and a reminder that offshore oil and natural gas resources are vital to the United States' "all of the above energy strategy".

However, NOIA believes the "all of the above" energy strategy should apply to areas where exploration currently is not allowed, and that greater access should be allowed to the 85 percent of the OCS currently not available for leasing, Luthi commented in a statement. A lack of modern seismic data leaves the industry guessing as to its true resource potential, Luthi added.

"Opening new offshore areas will open the door to new jobs, energy, and even more revenue to the federal treasury which could be used to help reduce the federal deficit," Luthi commented in a statement.

Louisiana Mid-Continent Oil and Gas Association President Chris John said the inefficiencies of the federal 2012-2017 offshore plan cannot be ignored, despite the solid lease sale results.

"With a $77.3 billion impact on our state and over 300,000 jobs supported, the economic impact of the oil and gas industry on the state of Louisiana alone is incredible," John said in a statement.

"The Gulf of Mexico has a strong future as an attractive investment area for drilling activity and today's lease sale will create jobs and increase revenues for the state of Louisiana."

Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

View the original article here

'Extremely Successful' Lease Sale Garners $1.6B in Total Bids

The deepwater Gulf will remain a cornerstone of U.S. domestic energy portfolio for "many years to come," Acting Assistant Secretary for Land and Minerals Management and Bureau of Ocean Energy Management Director (BOEM) Tommy Beaudreau praised after the results of Central Gulf of Mexico Lease Sale 227.

Central Gulf of Mexico Lease Sale 227 garnered total bids of $1.6 billion and high bids of $1.2 billion. Fifty-two oil and gas companies took part in Lease Sale 227, which Gulf of Mexico Regional Director John Rodi said ranked in the Top Ten of lease sales in terms of high bids since leasing began in 1983.

Beaudreau thanked the oil and gas industry for its continued interest in the central Gulf, and Rodi said the recent drilling success seen in the Gulf indicates the present and future value of the Gulf of Mexico.

Statoil Gulf of Mexico LLC and Samson Offshore LLC bid $81.8 million for Walker Ridge Block 271, the highest bid received in the lease sale.

Bidding results presented a significant indication of continued interest in the deepwater Gulf. Rodi attributed the interest in deepwater to new seismic data that has been made available and successful drilling results seen in the Gulf of Mexico over the past year. The focus on the deepwater Gulf – which is more costly and requires more focus on exploration and development plans – may be a reason for a lower level of bidding seen since the previous lease sale.

BOEM received 407 bids submitted by 47 companies on 320 offshore blocks in Central Gulf of Mexico Lease Sale 227. The sale acreage includes 7,299 blocks and covers approximately 38.6 million acres, located from three to about 230 nautical miles offshore in water depths ranging from 9 to over 11,115 feet (3 to 3,400 meters).

BOEM estimates the lease sale could result in the production of .46 billion to .89 billion barrels of oil, and 1.9 trillion cubic feet to 3.9 trillion cubic feet of natural gas.

BP plc did not directly submit bids in Wednesday morning's sale, but might have possibly partnered on a bid. BP was permitted to bid in the lease sale, but due to a suspension imposed last November by the U.S. Environmental Protection Agency from obtaining new oil drilling leases and other new contracts with the federal government, the company would not have been awarded a lease.

Despite its decision not to participate in the lease sale, the company intends to continue investing at least $4 billion annually in the region over the next decade, maintaining its position as the largest investor and leaseholder in the region. BP holds leases on nearly 700 Gulf of Mexico blocks, and currently has seven rigs operating in the Gulf. The deepwater Gulf also remains a core area for BP globally.

"We hope we can reach a reasonable resolution with regulators so that America's top energy investor over the past five years can once again enter into new contracts with the U.S. government," said Geoff Morrell, BP's head of U.S. communications, in an email statement to Rigzone.

Secretary of the Interior Ken Salazar called the lease sale a "historic day" and part of the Department of the Interior's (DOI) plan to implement President Obama's "all of the above" energy strategy. However, preliminary sale information indicates the number of tracts and acres receiving bids is down almost 30 percent versus last year's offering and nearly 40 percent compared with the average of the prior five sales, according to a March 19 analyst note from GHS Research.

GHS Research analysts attributed the decline to:

a 16 percent reduction in participants versus the 2012 sale and a 37 percent decline compared with the average of the prior five salesan 18 percent decline in the number of bids per participant versus last year and a 23 percent decline relative the previous five sales

Pent-up demand also may have been a factor in the higher level seen in the previous central Gulf lease sale since it was the first following the 2010 Macondo incident. Central Gulf Lease Sale 216/222, held in June 2012, resulted in $2.6 billion in total bids and $1.7 billion in high bids. Fifty-six companies bid on 454 blocks out of the 7,434 blocks that were offered.

"I do think there is a significant amount of acreage already under lease and robust exploration activity underway throughout the Gulf of Mexico," Salazar said in an earlier conference call with reporters Wednesday, noting that more rigs are operating in the Gulf of Mexico today before the Macondo incident in 2010.

Seventy-one jackups, semisubmersibles and drillships are under contract in the Gulf of Mexico as of March 20, up slightly from the 70 rigs under contract as of April 19, 2010, according to data from Rigzone's RigLogix database. Thirty-eight semisubs and drillships are currently under contract in the region, up from 34 under contract as of April 19, 2010.

Operators' sharpened focus on the Gulf's deepwater acreage also may be another factor in the lower level compared to the previous central Gulf sale.

"Companies may not bid as much but they hone in on selective acreage," said Beaudreau.

Since Macondo, DOI has undertaken an unprecedented overhaul of federal oversight into federal exploration and raised standards, Beaudreau commented.

"We've raised standards with respect to industry, and this activity is conducted more safety and responsibly," Beaudreau told reporters. "We've seen the benefits of that with strong investment in the Gulf of Mexico."

BOEM has been able to raise these standards thanks to funding that has allowed the agency to hire additional staff. The additional workers have not only allowed BOEM to implement heightened standards, but increase the efficiency and speed of the plan review and permitting process while not cutting corners.

"We've seen tremendous progress over the last year and a half," Beaudreau told reporters in a conference call. "The fundamental lesson we drew from the MMS [Minerals Management Service] was that it was a severely underfunded agency."

However, Beaudreau fears that the sequester – which means that BOEM staffers now have limited overtime – may prolong the time period on plan reviews.

"The BOEM and BSEE [Bureau of Safety and Environmental Enforcement] are can do agencies, but now we have the fiscal constraints we have to continue with," Beaudreau said, calling the funding limits imposed by the sequester "an extremely unfortunate situation."

Salazar said he was proud of the fact that the United States now imports less than 40 percent of the oil it consumes – a dramatic change from a few years ago. He noted that that a member of Iraq's oil ministry was on hand for the lease sale to learn more about the U.S. resource bidding process.

While BOEM recently announced plans for wind energy development offshore Virginia, no mid or south-Atlantic acreage is scheduled for bidding at this time. Beaudreau said BOEM has been working with the Department of Defense to identify offshore areas where military traffic might conflict with future oil and gas exploration. BOEM announced March 14 that a wind energy research lease was issued to Virginia's Department of Mines Minerals and Energy.

GHS anticipates a shift from exploration to development drilling to monetize discoveries such as Anadarko's recently announced Shenandoah-2 results in the deepwater Gulf of Mexico, which hit over 1,000 feet of net oil pay in multiple high-quality Lower Tertiary-aged reservoirs, will pick up following nearly a 70 percent/30 percent exploration/development split in recent years, "thus we are neither surprised nor concerned with a weak showing for new exploration."

Industry associations praised the lease sale results, but called for new areas of the U.S. Outer Continental Shelf (OCS) to be opened for exploration.

National Ocean Industries Association (NOIA) President Randall Luthi said the enthusiasm evident in the sale "confirms a continuing positive trend for the offshore industry in the Gulf of Mexico" and a reminder that offshore oil and natural gas resources are vital to the United States' "all of the above energy strategy".

However, NOIA believes the "all of the above" energy strategy should apply to areas where exploration currently is not allowed, and that greater access should be allowed to the 85 percent of the OCS currently not available for leasing, Luthi commented in a statement. A lack of modern seismic data leaves the industry guessing as to its true resource potential, Luthi added.

"Opening new offshore areas will open the door to new jobs, energy, and even more revenue to the federal treasury which could be used to help reduce the federal deficit," Luthi commented in a statement.

Louisiana Mid-Continent Oil and Gas Association President Chris John said the inefficiencies of the federal 2012-2017 offshore plan cannot be ignored, despite the solid lease sale results.

"With a $77.3 billion impact on our state and over 300,000 jobs supported, the economic impact of the oil and gas industry on the state of Louisiana alone is incredible," John said in a statement.

"The Gulf of Mexico has a strong future as an attractive investment area for drilling activity and today's lease sale will create jobs and increase revenues for the state of Louisiana."

Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

View the original article here

'Extremely Successful' Lease Sale Garners $1.6B in Total Bids

The deepwater Gulf will remain a cornerstone of U.S. domestic energy portfolio for "many years to come," Acting Assistant Secretary for Land and Minerals Management and Bureau of Ocean Energy Management Director (BOEM) Tommy Beaudreau praised after the results of Central Gulf of Mexico Lease Sale 227.

Central Gulf of Mexico Lease Sale 227 garnered total bids of $1.6 billion and high bids of $1.2 billion. Fifty-two oil and gas companies took part in Lease Sale 227, which Gulf of Mexico Regional Director John Rodi said ranked in the Top Ten of lease sales in terms of high bids since leasing began in 1983.

Beaudreau thanked the oil and gas industry for its continued interest in the central Gulf, and Rodi said the recent drilling success seen in the Gulf indicates the present and future value of the Gulf of Mexico.

Statoil Gulf of Mexico LLC and Samson Offshore LLC bid $81.8 million for Walker Ridge Block 271, the highest bid received in the lease sale.

Bidding results presented a significant indication of continued interest in the deepwater Gulf. Rodi attributed the interest in deepwater to new seismic data that has been made available and successful drilling results seen in the Gulf of Mexico over the past year. The focus on the deepwater Gulf – which is more costly and requires more focus on exploration and development plans – may be a reason for a lower level of bidding seen since the previous lease sale.

BOEM received 407 bids submitted by 47 companies on 320 offshore blocks in Central Gulf of Mexico Lease Sale 227. The sale acreage includes 7,299 blocks and covers approximately 38.6 million acres, located from three to about 230 nautical miles offshore in water depths ranging from 9 to over 11,115 feet (3 to 3,400 meters).

BOEM estimates the lease sale could result in the production of .46 billion to .89 billion barrels of oil, and 1.9 trillion cubic feet to 3.9 trillion cubic feet of natural gas.

BP plc did not directly submit bids in Wednesday morning's sale, but might have possibly partnered on a bid. BP was permitted to bid in the lease sale, but due to a suspension imposed last November by the U.S. Environmental Protection Agency from obtaining new oil drilling leases and other new contracts with the federal government, the company would not have been awarded a lease.

Despite its decision not to participate in the lease sale, the company intends to continue investing at least $4 billion annually in the region over the next decade, maintaining its position as the largest investor and leaseholder in the region. BP holds leases on nearly 700 Gulf of Mexico blocks, and currently has seven rigs operating in the Gulf. The deepwater Gulf also remains a core area for BP globally.

"We hope we can reach a reasonable resolution with regulators so that America's top energy investor over the past five years can once again enter into new contracts with the U.S. government," said Geoff Morrell, BP's head of U.S. communications, in an email statement to Rigzone.

Secretary of the Interior Ken Salazar called the lease sale a "historic day" and part of the Department of the Interior's (DOI) plan to implement President Obama's "all of the above" energy strategy. However, preliminary sale information indicates the number of tracts and acres receiving bids is down almost 30 percent versus last year's offering and nearly 40 percent compared with the average of the prior five sales, according to a March 19 analyst note from GHS Research.

GHS Research analysts attributed the decline to:

a 16 percent reduction in participants versus the 2012 sale and a 37 percent decline compared with the average of the prior five salesan 18 percent decline in the number of bids per participant versus last year and a 23 percent decline relative the previous five sales

Pent-up demand also may have been a factor in the higher level seen in the previous central Gulf lease sale since it was the first following the 2010 Macondo incident. Central Gulf Lease Sale 216/222, held in June 2012, resulted in $2.6 billion in total bids and $1.7 billion in high bids. Fifty-six companies bid on 454 blocks out of the 7,434 blocks that were offered.

"I do think there is a significant amount of acreage already under lease and robust exploration activity underway throughout the Gulf of Mexico," Salazar said in an earlier conference call with reporters Wednesday, noting that more rigs are operating in the Gulf of Mexico today before the Macondo incident in 2010.

Seventy-one jackups, semisubmersibles and drillships are under contract in the Gulf of Mexico as of March 20, up slightly from the 70 rigs under contract as of April 19, 2010, according to data from Rigzone's RigLogix database. Thirty-eight semisubs and drillships are currently under contract in the region, up from 34 under contract as of April 19, 2010.

Operators' sharpened focus on the Gulf's deepwater acreage also may be another factor in the lower level compared to the previous central Gulf sale.

"Companies may not bid as much but they hone in on selective acreage," said Beaudreau.

Since Macondo, DOI has undertaken an unprecedented overhaul of federal oversight into federal exploration and raised standards, Beaudreau commented.

"We've raised standards with respect to industry, and this activity is conducted more safety and responsibly," Beaudreau told reporters. "We've seen the benefits of that with strong investment in the Gulf of Mexico."

BOEM has been able to raise these standards thanks to funding that has allowed the agency to hire additional staff. The additional workers have not only allowed BOEM to implement heightened standards, but increase the efficiency and speed of the plan review and permitting process while not cutting corners.

"We've seen tremendous progress over the last year and a half," Beaudreau told reporters in a conference call. "The fundamental lesson we drew from the MMS [Minerals Management Service] was that it was a severely underfunded agency."

However, Beaudreau fears that the sequester – which means that BOEM staffers now have limited overtime – may prolong the time period on plan reviews.

"The BOEM and BSEE [Bureau of Safety and Environmental Enforcement] are can do agencies, but now we have the fiscal constraints we have to continue with," Beaudreau said, calling the funding limits imposed by the sequester "an extremely unfortunate situation."

Salazar said he was proud of the fact that the United States now imports less than 40 percent of the oil it consumes – a dramatic change from a few years ago. He noted that that a member of Iraq's oil ministry was on hand for the lease sale to learn more about the U.S. resource bidding process.

While BOEM recently announced plans for wind energy development offshore Virginia, no mid or south-Atlantic acreage is scheduled for bidding at this time. Beaudreau said BOEM has been working with the Department of Defense to identify offshore areas where military traffic might conflict with future oil and gas exploration. BOEM announced March 14 that a wind energy research lease was issued to Virginia's Department of Mines Minerals and Energy.

GHS anticipates a shift from exploration to development drilling to monetize discoveries such as Anadarko's recently announced Shenandoah-2 results in the deepwater Gulf of Mexico, which hit over 1,000 feet of net oil pay in multiple high-quality Lower Tertiary-aged reservoirs, will pick up following nearly a 70 percent/30 percent exploration/development split in recent years, "thus we are neither surprised nor concerned with a weak showing for new exploration."

Industry associations praised the lease sale results, but called for new areas of the U.S. Outer Continental Shelf (OCS) to be opened for exploration.

National Ocean Industries Association (NOIA) President Randall Luthi said the enthusiasm evident in the sale "confirms a continuing positive trend for the offshore industry in the Gulf of Mexico" and a reminder that offshore oil and natural gas resources are vital to the United States' "all of the above energy strategy".

However, NOIA believes the "all of the above" energy strategy should apply to areas where exploration currently is not allowed, and that greater access should be allowed to the 85 percent of the OCS currently not available for leasing, Luthi commented in a statement. A lack of modern seismic data leaves the industry guessing as to its true resource potential, Luthi added.

"Opening new offshore areas will open the door to new jobs, energy, and even more revenue to the federal treasury which could be used to help reduce the federal deficit," Luthi commented in a statement.

Louisiana Mid-Continent Oil and Gas Association President Chris John said the inefficiencies of the federal 2012-2017 offshore plan cannot be ignored, despite the solid lease sale results.

"With a $77.3 billion impact on our state and over 300,000 jobs supported, the economic impact of the oil and gas industry on the state of Louisiana alone is incredible," John said in a statement.

"The Gulf of Mexico has a strong future as an attractive investment area for drilling activity and today's lease sale will create jobs and increase revenues for the state of Louisiana."

Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

View the original article here

Crux JV Receives Retention Lease Offer from Joint Authority

Nexus Energy disclosed Wednesday that the Crux joint venture has received an offer from the Joint Authority for the issuance of a retention lease, with respect to Production License AC/L9, for five years.

The Crux JV applied for the retention lease with the National Offshore Petroleum Titles Administrator following completion of the consolidation of the Crux assets with Shell Development (Australia), Oaska Gas Crux and Nexus Energy on Oct. 25, 2012.

"The Crux JV will now review the attaching conditions to the retention lease offer and has up to 30 days to formally accept. The detailed work program and associated defined timelines include technical studies of a range of development options, including a standalone development concept, and exploration drilling of the Auriga prospect targeted for 2014," Crux said in a statement.

The development options currently under consideration for the Crux field include a tie-in to Shell's Prelude floating liquefied natural gas (FLNG) vessel or a standalone FLNG project.

Under the Crux JV agreement, Shell is operator of the Production License AC/L9, with an 80 percent interest. Nexus and Osaka Gas hold a 17 percent and 3 percent interest respectively.

Quintella has reported on the upstream and downstream oil and petrochemicals markets from 2004. Email Quintella at quintella.koh@rigzone.com.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

View the original article here

Gulf Lease Sale Emphasizes Need for Expanded Opportunities

Some details from Wednesday’s federal lease sale in the central Gulf of Mexico (news coverage here and here):

Size – The Bureau of Ocean Energy Management (BOEM) sale attracted high bonus bids of $1.7 billion for the area off the coasts of Louisiana, Mississippi and Alabama – ranging as far as 230 miles into the Gulf. Bids – Fifty-six companies submitted 593 bids on 454 tracts, with the sum of all bids totaling more than $2.6 billion. That’s a big sale, though not the biggest ever. According to BOEM the biggest value lease sale was $3.68 billion in the central Gulf in March 2008. The last sale in the central Gulf in March 2010 totaled $949 million. Record – The highest bid on a single tract was $157.1 million, submitted by Statoil in the Mississippi Canyon, Block 718 – about three times higher than the previous top bid of $52.5 million submitted in 2010.

Now, some perspective.  As API’s Erik Milito said Tuesday, the simple fact that the federal government held a lease sale in the central Gulf is important. It had been more than two years since drilling blocks had been put up for bid. That BOEM opened more than 38 million acres after a two-years-plus hiatus was a positive step.

Interior Secretary Ken Salazar heralded the sale as evidence of the administration’s “all-of-the-above” energy strategy:

“When it comes to domestic production, the president has made clear he is committed to expanding oil and natural gas production safely and responsibly, and today's sale is just the latest example of his administration delivering on that commitment. … The Gulf is back. There is great robustness in oil and gas activity currently under way in the Gulf, as well as interest in additional exploration.”

Well, it’s probably more accurate to say the Gulf is getting back. Unfortunately, just returning to 2010 levels of activity (rig counts, etc.) concedes that two years of production were negatively affected by the administration’s policies – the 2010 deepwater drilling moratorium and the slow pace of permitting when the ban was lifted. Given that context, sure, industry was enthusiastic about Wednesday’s sale. National Ocean Industries Association President Randall Luthi:

“A sale of this size signals a strong industry commitment to the Gulf of Mexico and to our nation’s energy future and to more domestic jobs.”

More context: The areas opened for bidding this week have been considered before, which is what Milito emphasized on Tuesday. The central Gulf was not a new area for development. So, instead of restricting opportunity to these areas, the government should be expanding it to new ones. As Luthi suggests, industry is willing and able to do more. Just imagine the robustness of the bidding if the lease areas were in the Eastern Gulf or off the Pacific and Atlantic coasts – areas with undiscovered, technically recoverable reserves estimated at 1.40 billion, 10.37 billion and 3.82 billion barrels, respectively (see map).

Milito from Tuesday:

“Exploration is what leads to production. And it is important to understand that it is critical to maintain a robust leasing program to allow companies to explore new prospects and replace the production that is coming from existing wells. Maintaining the status quo won’t work.”

Opening up more U.S. resources for development (onshore as well) is the real path to expanding domestic oil and natural gas production – which is fundamental to a true, all-of-the-above energy approach. It’s critical to an American-made energy strategy that will create jobs, expand the economy and help us be more energy secure in the future.

View the original article here

Gulf Lease Sale Emphasizes Need for Expanded Opportunities

Some details from Wednesday’s federal lease sale in the central Gulf of Mexico (news coverage here and here):

Size – The Bureau of Ocean Energy Management (BOEM) sale attracted high bonus bids of $1.7 billion for the area off the coasts of Louisiana, Mississippi and Alabama – ranging as far as 230 miles into the Gulf. Bids – Fifty-six companies submitted 593 bids on 454 tracts, with the sum of all bids totaling more than $2.6 billion. That’s a big sale, though not the biggest ever. According to BOEM the biggest value lease sale was $3.68 billion in the central Gulf in March 2008. The last sale in the central Gulf in March 2010 totaled $949 million. Record – The highest bid on a single tract was $157.1 million, submitted by Statoil in the Mississippi Canyon, Block 718 – about three times higher than the previous top bid of $52.5 million submitted in 2010.

Now, some perspective.  As API’s Erik Milito said Tuesday, the simple fact that the federal government held a lease sale in the central Gulf is important. It had been more than two years since drilling blocks had been put up for bid. That BOEM opened more than 38 million acres after a two-years-plus hiatus was a positive step.

Interior Secretary Ken Salazar heralded the sale as evidence of the administration’s “all-of-the-above” energy strategy:

“When it comes to domestic production, the president has made clear he is committed to expanding oil and natural gas production safely and responsibly, and today's sale is just the latest example of his administration delivering on that commitment. … The Gulf is back. There is great robustness in oil and gas activity currently under way in the Gulf, as well as interest in additional exploration.”

Well, it’s probably more accurate to say the Gulf is getting back. Unfortunately, just returning to 2010 levels of activity (rig counts, etc.) concedes that two years of production were negatively affected by the administration’s policies – the 2010 deepwater drilling moratorium and the slow pace of permitting when the ban was lifted. Given that context, sure, industry was enthusiastic about Wednesday’s sale. National Ocean Industries Association President Randall Luthi:

“A sale of this size signals a strong industry commitment to the Gulf of Mexico and to our nation’s energy future and to more domestic jobs.”

More context: The areas opened for bidding this week have been considered before, which is what Milito emphasized on Tuesday. The central Gulf was not a new area for development. So, instead of restricting opportunity to these areas, the government should be expanding it to new ones. As Luthi suggests, industry is willing and able to do more. Just imagine the robustness of the bidding if the lease areas were in the Eastern Gulf or off the Pacific and Atlantic coasts – areas with undiscovered, technically recoverable reserves estimated at 1.40 billion, 10.37 billion and 3.82 billion barrels, respectively (see map).

Milito from Tuesday:

“Exploration is what leads to production. And it is important to understand that it is critical to maintain a robust leasing program to allow companies to explore new prospects and replace the production that is coming from existing wells. Maintaining the status quo won’t work.”

Opening up more U.S. resources for development (onshore as well) is the real path to expanding domestic oil and natural gas production – which is fundamental to a true, all-of-the-above energy approach. It’s critical to an American-made energy strategy that will create jobs, expand the economy and help us be more energy secure in the future.

View the original article here

The Offshore Oil and Natural Gas Lease Sale We Need

Tomorrow’s scheduled Central Gulf of Mexico oil and natural gas lease sale in New Orleans will be the first in that area since March 2010. Setting aside for a moment the two-year gap in exploration and development caused by two years without new sales, tomorrow’s auction is important to America’s economic and energy security.

Unfortunately, the two-year gap is real and has real impact. Because it takes seven to 10 years for an offshore lease to start producing oil or natural gas, there’s a gap in the development timeline. It’s like a vintner who skips two years growing grapes; at some point in the wine-producing process there’ll be a lean vintage year. Here’s a chart that shows the stages and time requirements of offshore development:

A couple of other points about tomorrow’s lease sale, underscored by API’s Upstream and Industry Operations Director Erik Milito during a conference call with reporters: While it’s good the Bureau of Ocean Energy Management is holding the sale – which will generate significant industry interest – the areas in the Gulf being offered aren’t new, emphasizing the administration’s restricted approach to developing America’s energy resources. Milito:

“Every lease sale is important, but more important for our energy future than any individual sale is our nation’s broader energy policy framework. That, unfortunately, has been inadequate. The administration’s proposed five-year offshore leasing plan for 2012 through 2017 … would limit offshore development to where it historically has always been – parts of the Gulf of Mexico and offshore Alaska. It would restrict opportunities when it should be expanding them. It would not help prepare us well for our energy future.”

If the energy goal is to reduce oil imports, then tomorrow’s sale reflects a short-sighted vision that will struggle to take us there. Good news: It doesn’t have to be that way. America is energy-rich, with the resources, financial wherewithal and technological know-how to substitute domestic production for much of what we get now from foreign suppliers. It simply takes the right plan, the right approach.

With the right access policies – capitalizing on tight oil and shale gas discoveries, our offshore potential and increased supplies from neighbor and ally Canada – we could see 100 percent of our liquid fuel needs met by 2024, a little more than a decade away. Milito:

“We can do it safely. Industry continues to demonstrate a commitment to continuous improvement in operations to make things safer for our personnel, the public and the environment. In the offshore the industry, working closely with government, has enhanced its ability to prevent, contain and respond to a spill.”

Energy development is a long-term process. Limited vision and action sows seeds for the future. Milito:

“The proposed Department of Interior five-year plan is insufficient, and each year we implement it we will fall further behind what we really should be doing. The administration ought to begin working on a new plan immediately.  … Maintaining the status quo won’t work. Existing wells are continually depleting and need to be replaced with new discoveries. It is also important to open new areas for leasing so that industry can use new exploration technologies that will increase production.”

View the original article here