Cautious responses to GoM lease-sale

The largest federal government-sponsored Gulf of Mexico offshore lease offerings in history (77M acres) drew cautious responses from industry March 22 with $124.7M in winning bids for 815,403 acres. Thirty-three companies participated, including Chevron, Royal Dutch Shell and Total SA. During the last GoM lease sale in August 2017, 30 companies took 508,096 acres. The 2018 lease-sale brought an average of $153 per acre, well below previous averages. It’s been a long fall from the boom years of March 2012 when 80 companies bid a combined $352M in two federal lease sales, when there was much interest in shallow-water leases. Recognizing the tough economic conditions facing shallow water operators today, the U.S. Department of Interior (DOI) set a 12.5 percent royalty rate for leases in 656 feet or less, down from 18.75 percent. A day before the New Orleans-based sale, National Ocean Industries Association President Randall Luthi sounded optimistic, but stressed that companies are looking globally for their next opportunities. The “United States must continue to evaluate how to keep the Gulf of Mexico and other parts of the U.S. outer continental shelf attractive in light of competition from Brazil and Mexico.” Lease Sale 250 was the second offshore sale held under the National Outer Continental Shelf Oil and Gas Leasing Program for 2017-22. The plan has scheduled 10 region-wide lease sales for the GoM - two per year, including all available blocks in the combined western, central, and eastern GoM planning areas. (Source: Work Boat 03/22/18)