Western Gulf lease sale draws tepid interest

The federal government will open bids from a dozen companies seeking new drilling leases in the western Gulf of Mexico on Wednesday.

But none of them will be from BP, which is suspended from new government contracts in connection with the 2010 Deepwater Horizon disaster. In July, the ocean energy bureau said it would accept offers from BP but any high bids will be granted only if the suspension is lifted following a post-sale evaluation period.

BP decided to pass on the offer, echoing its approach to the last offshore lease sale, in March, which covered central Gulf territory generally viewed more attractive for oil and gas development.

In a statement, BP cited the suspension and its substantial Gulf portfolio — nearly 700 leased blocks already — for opting out of the sale:

“Due to our extensive portfolio of Gulf acreage and the uncertainty surrounding the suspension and debarment of certain BP businesses, we have decided not to participate in this week’s lease sale,” the company said. “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.”

The Interior Department’s Bureau of Ocean Energy Management, which will conduct the auction at the Mercedes-Benz Superdome in New Orleans, said it had received 61 bids covering 53 offshore blocks.

An auction of similar western Gulf tracts last year netted nearly $134 million. But that sale lured 116 bids.

Companies were required to pay a minimum bonus bid of $25 per acre (or fraction) for acreage in less than 1,300 feet of water and $100 or more per acre for blocks in deeper territory.

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Energy produced from the leases would be subject to an 18.75 percent royalty rate plus annual rental fees that start at $7 per acre for the shallowest territory. The annual rent increases to as high as $44 an acre after eight years.

The ocean energy bureau received one bid within the so-called “Western Gap” area near the U.S. and Mexico boundary in the Gulf.

Although companies were allowed to submit bids on those tracts, the offers are contingent on the U.S. Congress implementing a Feb. 20, 2012 agreement with Mexico that sets the framework for oil and gas development in the region. Although the House passed legislation to enact the year-old treaty in August, it added in an unrelated provision tied to a Securities and Exchange Commission reporting requirement that could sink the deal.

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A total of 3,864 blocks were originally up for grabs in Wednesday’s sale, 107 of which were newly available, having recently been forfeited or relinquished back to the federal government. Sales with a great deal of newly available acreage can attract more interest, and 10 of the 107 newly available blocks received bids.

The bulk of the bids — 37  — came for territory in water depths ranging from half a mile to a mile that  carries a 7-year lease term.

One deep-water tract under about a mile of water in the Alaminos Canyon area of the Gulf received four bids — the highest number of offers for a single block in Wednesday’s auction. Four other Alaminos Canyon blocks received multiple bids; two offers also came in for High Island 380.

Companies participating in Wednesday’s auction include ConocoPhillips Co., Hess Corp., Chevron, Exxon Mobil Corp., Shell Offshore, W&T Offshore, Anadarko US Offshore Corp., Statoil Gulf of Mexico, Maersk OIl Gulf of Mexico, Castex Offshore, EnVen Energy Ventures and Apache Shelf Exploration.

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