Some Gulf lease bids on hold as U.S.-Mexico work on deal

Gulf of Mexico (Wikimedia Commons)

A handful of tracts on the auction block during the government’s sale of Western Gulf of Mexico leases this December will be temporarily off limits for development while the U.S. and Mexico hammer out a deal governing offshore drilling in international waters.

Administration officials said the decision is meant to allow more time for negotiations between the two countries over safe and environmentally responsible development of oil and natural gas reservoirs that straddle both sides of the U.S.-Mexico boundary in the Gulf of Mexico. The two countries launched negotiations last August, and the administration’s move is designed to allow those talks to continue through next June.

According to the Bureau of Ocean Energy Management, Regulation and Enforcement, all blocks up for sale on Dec. 14 will still be available for bidding. But bids on 3,900 blocks — about 5 percent of what is available — that are within three nautical miles of the international border will be held until an agreement is reached or until June 14, 2012.

According to information for lessees distributed by the agency today, if an agreement is reached, companies will be notified of the terms of that deal and given 20 days to decide whether to withdraw their bids or reaffirm their interest in acquiring the tracts for oil and gas development.

If the U.S. and Mexico don’t sign a deal by next June, the Interior secretary will decide whether to open the bids and allow exploration and development.

BOEMRE Director Michael Bromwich, speaking at the Platts Energy Podium this morning, said the decision seemed “the fairest and most appropriate way to handle that small number of blocks.” Putting some of the bids on hold temporarily has been done with previous Gulf of Mexico lease sales, he noted.

“We think industry will be familiar with it because they’ve handled it before,” Bromwich said. BOEMRE officials felt that was “the best way to handle this unkown.”