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The world’s biggest oil companies preferred to bid on areas close to existing infrastructure and largely stayed out of unexplored acreage in last month’s lease sale in the Gulf of Mexico, which drew bids on just 1 percent of the total area up for grabs, despite the U.S. Administration touting it as the largest oil and gas lease sale in U.S. history.
The lease sale offered 77.3 million acres in the Gulf of Mexico comprised of 14,431 blocks. The number of blocks that received bids was 148—just 1 percent of the blocks offered. The sum of high bids was US$124.8 million, with bids totaling US$139 million.
The top companies based on the total number of high bids submitted ranked as follows: BP, Chevron, Shell, Total, and Hess Corporation, the Bureau of Ocean Energy Management (BOEM) said. In terms of the single highest bids, Total led the ranking, followed by Shell and Chevron.
“Today’s lease sale is yet another step our nation has taken to achieve economic security and energy dominance,” Interior Assistant Secretary for Land and Minerals Management Joe Balash said after the lease sale.
However, according to a Reuters analysis on the areas and bids, Big Oil was targeting mostly areas very close to existing infrastructure to maximize the discovery potential and minimize development costs of a potential discovery. Out of the 105 new U.S. leases in the Gulf of Mexico at water depths of more than 656 feet, 85 leases were adjacent to existing leased acreage or platforms, while another 17 leases lie within two miles from existing infrastructure or leases, the analysis showed.
Both BP and Shell told Reuters that with this lease sale they were targeting acreage close to their respective facilities and production in order to build onto their existing acreage.
The focus on highly developed areas in this lease sale highlights the trend that companies are not yet willing to splash money on prospecting in far-off and unexplored areas, just as they started to generate more cash and profits after the downturn.
“Spending a lot of money to prospect is probably not going to be looked upon with favor by investors,” Michael Cohen, director of commodity research at Barclays, told Reuters.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.