Acadiana Business

Gulf auction fourth largest at $1.74 billion

by Leslie Turk

"The Gulf is back," declared Interior Secretary Ken Salazar. On Wednesday, when the Interior Department held its first oil and gas lease sale in the central Gulf of Mexico since the Deepwater Horizon disaster, oil and gas companies submitted $1.74 billion in winning bids for 454 offshore tracts, with Norway's Statoil establishing a new high for its $157 million offering for a single lease.

The Obama administration immediately pointed to the strong auction in what's commonly called the Louisiana Outer Continental Shelf as a sign of a Gulf of Mexico rebirth more than two years after the BP oil spill that led to a moratorium on deep-water drilling and subsequent cancellation of a similar lease sale planned for August 2010.

The total auction was the fourth largest in the Gulf's history and Statoil's the single biggest bid in three decades. "This is a record-breaking oil and gas lease sale in the Gulf of Mexico," said Interior Secretary Ken Salazar. "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."

In a press release announcing the sale, Louisiana Department of Natural Resources Secretary Scott Angelle called the high interest further proof that energy exploration and production companies are prepared to invest in developing the resources of the area.

Combined with the December 2011 federal lease sale for the Western Gulf of Mexico, commonly referred to as the Texas OCS, exploration companies have committed more than $2 billion in Gulf of Mexico leasing in the past seven months, Angelle noted.

Angelle led the state's efforts to mediate issues between federal regulators and energy exploration companies through the Back-To-Work Coalition, an association of Gulf exploration stakeholders that has worked, and continues to work, to find a regulatory middle ground that ensures safe and responsible operations while allowing development of the resources that provide domestic energy and domestic jobs.

"We have been telling federal regulators that companies have the desire and the resources to invest in the Gulf of Mexico, and the recent progress we have made in improving the pace of permitting, although we are not yet where we want to be, is the best way to express confidence to the marketplace," Angelle said in the press release.

Analysts with Simmons & Co. International characterized the sale as "less than robust," noting that just 6 percent of the tracts available for lease received bids. That compared with 7 percent in a 2010 central Gulf lease sale, and an average of 9 percent over the previous five central Gulf sales, The Wall Street Journal reported.