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Gulf of Mexico is Back, and Subsalt is all the Rage

In late March, the US Department of Interior released the results of its Central Gulf of Mexico lease sale 227. It was a great auction, with a LOT of interest—52 companies, 407 bids and 320 tracts up for offer--and heavy bidding competition. This is only a fraction of the blocks up for grabs (4.5%), so there’s a lot more to come.

This is the rebound from the 2010 oil spill, which saw a major slump in bidding. This time around, minimum bids for deep-water acres were around $100 per acre, compared to 2012 when the minimum per acre was only about $37. Then, companies bought acreage, but failed to do anything with it. Now, with the minimum bid raised, and more time allowed on the lease if operators drill wells, there should be more activity.  (In November 2012, when the DOI offered over 20 million acres in the western Gulf, it generated only $233 million in bids on 3% of the land offered.)

These sub-salt plays were temporarily sidelined by the shale revolution onshore, but now what we are about to see—in part spurred by sub-salt and pre-salt success in Brazil--is the true development of sub-salt plays in the Gulf of Mexico. Analysts believe we could see $70 billion spent on exploration here by 2030, making it THE most active deep-water play in the world—more active than all of them combined. 

The details of the lease sale are telling, especially in terms of the number of bids for deep and shallow-water acreage. …

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