Yesterday's Gulf of Mexico lease sale draws $382 million in high bids

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Competitive bidding in Gulf of Mexico Lease Sale 261 pushed the total of high bids to $382 million Dec. 20, a large increase over the last sale, as companies especially went after blocks in Mississippi Canyon and Green Canyon deepwater areas south of Louisiana.

The Bureau of Ocean Energy Management (BOEM) said 26 companies participated in the sale, submitting 352 bids for 311 tracts covering 1.7 million acres in federal waters. BOEM had offered more than 13,000 tracts covering 72.7 million acres.

Anadarko Petroleum Corp., Hess Corp., and Shell plc were especially aggressive bidders, followed by Chevron Corp., Woodside Energy Group Ltd., Equinor ASA, bp plc, and Repsol SA.

Anadarko’s aggregate bids topped $100 million, including $25 million for a block in the Mississippi Canyon area, the highest of any single bid, and $17 million for a Green Canyon block.

Hess was not far behind at almost $91 million overall. Hess focused especially on the Green Canyon area, where its highest bid, at $21 million, topped a $4.8 million bid by Chevron. But Chevron may get that block anyway, along with the several other tracts Hess snapped up in Green Canyon, if their merger goes through as announced (OGJ Online, Oct. 23, 2023).

Shell bid on more blocks than any other company, its total aggregate bids reaching $74.6 million. Its went after blocks in the Mississippi Canyon and Green Canyon areas, in addition to a large number of tracts in the Alaminos Canyon area off Texas in the far southwest of the US Gulf of Mexico.

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On the day before the latest lease sale, Erik Milito, President of the National Ocean Industries Association, told Oil & Gas Journal he expected robust bidding, partly because it will be the last sale on the schedule until 2025. The lack of a 2024 sale plan has drawn criticism from oil and gas trade groups, who warn that Biden administration policies may simply shift more investment to other countries.

After the sale, Milito made a pitch for reinvigorated lease sale planning.

"Today signifies a critical point in American energy policy," Milito said, describing this as a time of significant and unnecessary uncertainty. "Without congressional intervention, this is the final lease sale until 2025. In our forward-thinking industry, securing new lease blocks is vital for exploring and developing resources crucial to the US economy."

Lease Sale 261 was originally scheduled to be held in 2022, but the Biden administration canceled it. The Inflation Reduction Act (IRA), a 2022 law negotiated by Sen. Joe Manchin (D-W.Va.), in a tug of war with the White House, got the sale rescheduled for no later than Sept. 30, 2023. The Interior Department attempted to change the lease stipulations at the 11th hour but was blocked by the courts, after which the sale was rescheduled for Dec. 20.

"Lease Sale 261 has been a long time coming, and the fact that it is happening today despite the administration’s attempts to cancel, shrink, and delay this sale is a testament to the importance of the IRA for our energy security," Manchin said in a Dec. 20 statement.

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