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Copper Tip Energy Services
Copper Tip Energy
Vista Projects

Oil companies make few bids in U.S. offshore lease auction

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NEW YORK (Reuters) – Oil companies bid on less than 1 percent of the parcels offered in a sweeping U.S. auction of Gulf of Mexico exploration leases on Wednesday, showing tepid interest in the region for the second time this year.

Oil giant Exxon Mobil Corp was awarded 25 blocks, the largest of any company, followed by BP Plc with 19 high bids and Hess Corp and Equinor, which each had 16.

Smaller companies, including Talos Energy Offshore, Houston Energy and W&T Offshore were among the top ten high bidders. In total, 23 companies bid in the U.S. Bureau of Ocean Energy Management’s auction.

In all, there were $178 million worth of high bids, the agency said, up from $124 million in the last auction, in March. Companies submitted bids for 144 parcels offered, less than 1 percent of the 14,575 available blocks, and fewer than the spring auction that attracted 148 bids.

Oil companies had lobbied for lower royalty payments for deepwater acreage because of the projects’ high cost and long lead time before production can begin. The Interior Department rejected a recommendation from an advisory panel that had suggested it lower rates.

Exxon bid $40.5 million for its parcels in total, the most of any company, while Hess submitted the highest bid for a single block – $25.9 million.

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The U.S. Gulf of Mexico has faced waning interest in recent years as competition has stepped up from other basins globally, as well as from onshore shale basins and Mexico’s waters in the Gulf.

Acreage with more than 200 meters of water depth was most popular, with 112 parcels receiving bids. Shallower parcels saw 32 bids. The deeper acreage has a higher royalty rate of 18.75 percent, compared with 12.5 percent for shallower parcels.

Green Canyon, a well-trod production area in the Gulf, received the most bids, as oil companies try to stay close to existing infrastructure. Mississippi Canyon, which also has widely developed infrastructure, received Hess’ highest single bid on a block.

Parcels in Lloyd Ridge and DeSoto Canyon, near the eastern most boundary of available acreage, also saw new interest.

Reporting by Jessica Resnick-Ault, Editing by Rosalba O’Brien

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