$290 million in high bids for western Gulf lease sale

(AP) With emphasis on potential finds in deep water and a continued return to shallow areas once thought depleted of recoverable natural gas, companies made high bids totaling $290 million for 282 federal offshore oil and gas leases in the western Gulf of Mexico last Wednesday.

The sale had offered 3,338 tracts consisting of about 18 million acres off the coast of Texas.

Last year’s western Gulf sale resulted in $340.9 million in high bids for 381 tracts – the largest sale in that region in eight years.

However, since some tracts had been shifted to the larger eastern Gulf, involving a different sale, more tracts were the subject of more bids this year in the comparable western area, said Chris Oynes, associate director for offshore minerals management with the federal Minerals Management Agency.

“It was not a record sale, but it was a very good sale,” said Lars Herbst, MMS acting regional director.

The highest bids and the most bids were targeted at ultra-deepwater tracts in 800 meters of water or more. Six such tracts collected a total of $113.3 million in high bids, with five of the sites claimed by Statoil Gulf of Mexico LLC, a unit of Norway’s state controlled Statoil ASA oil company.

Statoil put up nearly half of the high bids in last week’s sale, including a $37.6 million bid for a tract in 2,000 meters of water located 200 miles south of Galveston, Texas.

Statoil has been increasing its holdings in the Gulf in recent years, including acquiring portions of current leases and its 2005 purchase In 2005 Statoil acquired Canada-based EnCana Inc.’s entire deepwater portfolio in the Gulf for $2 billion.

Herbst said the interest in those sites likely was triggered by recent deepwater discoveries in nearby Gulf tracts. Such tracts require expensive long-term development and are not necessarily driven by current oil and natural gas prices.

Also drawing continued interest were tracts of 200 meters or less on the shallow Gulf shelf, considered prime ground for the development of natural gas deposits deep in the earth. Easy to reach gas was produced years ago and the leases were largely abandoned before advances in technology and high gas prices lured exploration companies back.

Two major deepwater players, BP Exploration & Production Inc., a unit of BP PLC, and

Petrobras America Inc., a unit of Brazil’s state-run oil company Petroleo Brasileiro SA, also were heavy bidders on potential “deep gas” locations.

Oynes said some of the shelf tracts had been leased seven or eight times during the years and produced two or three times before technological limits in reaching deeper gas caused them to be shuttered.

Statoil posted the largest total of high bids at $138.9 million, followed by BP with $31 million and Petrobras America with $29.3 million.