• 30 mins Iraq Asks BP To Redevelop Kirkuk Oil Fields
  • 18 hours Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 19 hours Oil Gains Spur Growth In Canada’s Oil Cities
  • 20 hours China To Take 5% Of Rosneft’s Output In New Deal
  • 20 hours UAE Oil Giant Seeks Partnership For Possible IPO
  • 21 hours Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 22 hours VW Fails To Secure Critical Commodity For EVs
  • 23 hours Enbridge Pipeline Expansion Finally Approved
  • 24 hours Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 1 day OPEC Oil Deal Compliance Falls To 86%
  • 2 days U.S. Oil Production To Increase in November As Rig Count Falls
  • 2 days Gazprom Neft Unhappy With OPEC-Russia Production Cut Deal
  • 2 days Disputed Venezuelan Vote Could Lead To More Sanctions, Clashes
  • 2 days EU Urges U.S. Congress To Protect Iran Nuclear Deal
  • 2 days Oil Rig Explosion In Louisiana Leaves 7 Injured, 1 Still Missing
  • 2 days Aramco Says No Plans To Shelve IPO
  • 5 days Trump Passes Iran Nuclear Deal Back to Congress
  • 5 days Texas Shutters More Coal-Fired Plants
  • 5 days Oil Trading Firm Expects Unprecedented U.S. Crude Exports
  • 5 days UK’s FCA Met With Aramco Prior To Proposing Listing Rule Change
  • 5 days Chevron Quits Australian Deepwater Oil Exploration
  • 5 days Europe Braces For End Of Iran Nuclear Deal
  • 6 days Renewable Energy Startup Powering Native American Protest Camp
  • 6 days Husky Energy Set To Restart Pipeline
  • 6 days Russia, Morocco Sign String Of Energy And Military Deals
  • 6 days Norway Looks To Cut Some Of Its Generous Tax Breaks For EVs
  • 6 days China Set To Continue Crude Oil Buying Spree, IEA Says
  • 6 days India Needs Help To Boost Oil Production
  • 6 days Shell Buys One Of Europe’s Largest EV Charging Networks
  • 6 days Oil Throwback: BP Is Bringing Back The Amoco Brand
  • 6 days Libyan Oil Output Covers 25% Of 2017 Budget Needs
  • 6 days District Judge Rules Dakota Access Can Continue Operating
  • 7 days Surprise Oil Inventory Build Shocks Markets
  • 7 days France’s Biggest Listed Bank To Stop Funding Shale, Oil Sands Projects
  • 7 days Syria’s Kurds Aim To Control Oil-Rich Areas
  • 7 days Chinese Teapots Create $5B JV To Compete With State Firms
  • 7 days Oil M&A Deals Set To Rise
  • 7 days South Sudan Tightens Oil Industry Security
  • 8 days Over 1 Million Bpd Remain Offline In Gulf Of Mexico
  • 8 days Turkmenistan To Spend $93-Billion On Oil And Gas Sector
Alt Text

The Permian Boom Is Coming To An End

There are signs that the…

Alt Text

Rising OPEC Production Weighs On Oil Prices

After seeing a slight drop…

Alt Text

World’s Biggest Oil Trader Questions Its Own Fate

The world’s no.1 crude oil…

Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing for news outlets such as iNVEZZ and…

More Info

Has The Gulf Of Mexico Fallen Out Of Favor With The Oil Majors?

COP rig

A glitch interrupted the first-ever U.S. livestream of an oil lease sale on Wednesday, and although it didn’t affect the bidding, this epic fail provided just the right metaphor to describe the flop of the latest auction in the Gulf of Mexico, which saw a record low number of companies offering record-low money for leases in the western parts of the Gulf.

Upon announcing in July the first-ever federal livestream of a lease sale, the U.S. Bureau of Ocean Energy Management (BOEM) had said that the 23.8-million-acre area offshore Texas was estimated to have economically recoverable hydrocarbons of between 116 million and 200 million barrels of oil and between 538 billion and 938 billion cubic feet of natural gas.

So far, so good. This week’s lease sale, however, showed the dismal stark reality: just three companies bid for 24 tracts covering 138,240 acres, with all bids totaling just US$18 million. All three bidders were units of three of the majors, BP (NYSE:BP), Exxon Mobil (NYSE:XOM), and mining giant heavily-invested in oil exploration, BHP Billiton (NYSE:BHP).

To put the numbers into context and perspective, the previous lease sale in the Western Gulf of Mexico from last year attracted bids from five companies for tracts covering some 190,080 acres (out of 21.9 million acres up for grabs), with all bids worth a total of US$22.7 million.

Now, last year’s lease sale was surely not a good example of high turnout and bidding, but this year’s auction managed to squeak underneath that paltry figure, and only managed to set negative records.

Those two latest auctions show that companies are not willing to spend insane amounts of money on new tracts in the Gulf of Mexico at these low oil prices. Instead, oil groups have adopted a cautious and conservative approach to new investments and are slashing capex and costs en masse in order to at least partially offset the negative impact of the depressed crude price. Related: China’s Oil Majors Are Burning Through Oil Reserves

In comparison, a Western Gulf of Mexico lease sale in April of 2012 resulted in the BOEM accepting high bids worth a total of US$325 million, including the auction’s highest single accepted bid of US$103.2 million from ConocoPhillips (NYSE:COP), which was the second-biggest bid since area-wide leasing was launched in 1984.

However, oil prices then were above the US$100 mark, and it would be another two years and a couple of months until crude prices started crashing. These days — with oil at just-below US$50 — the US$100 crude is as long a shot as the Gulf of Mexico is far from Alaska.

Commenting on the latest failed lease sale in the U.S. Gulf, Stewart Glickman, an analyst at S&P Global Market Intelligence, told the AP: “Everything about this sale screams wariness.”

The analyst then went on to explain that operating a rig offshore may cost eight times as much as leasing an onshore drilling rig, which costs around US$20,000 per day. Related: The Best Way To Unlock Canada’s Crude Exports

Wary as they are for the U.S. Gulf lease sales, majors are bidding in Mexico’s first-ever deepwater oil and gas tender in the Gulf of Mexico, which is expected to reap US$44 billion in proceeds. The tender, slated to take place on December 5, is for ten deepwater blocks in an area that holds what’s estimated to be 76 percent of Mexico’s prospective crude reserves.

Mexico only allowed foreign oil companies to explore and exploit its crude reserves two years ago, forced by an 11-year decline in production.

And this past Wednesday, while the U.S. lease sale auction was dismally failing, Mexico’s National Hydrocarbons Commission, CNH, announced the names of the 26 companies short-listed to participate in its deepwater tender, including 16 firms that have been approved as operators and ten as potential partners in consortiums.

It’s no surprise that the list contains all the usual suspects. The question is, how long the companies will have to keep pushing off investments in new projects until oil prices recover to a level high enough to justify a renewed splurge on drilling costs in the Gulf of Mexico.

By Tsvetana Paraskova for Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News