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Gulf of Mexico oil lease sale number 259 held on Wednesday attracted $264 million in bids for drilling rights in an area estimated to hold nearly 30 billion barrels of oil, with Chevron coming in with the highest bids, followed by BP, Shell and Equinor.
Chevron turned up with seven of the 10 highest bids for blocks, with BP Exploration & Production Inc and Equinor Gulf of Mexico LLC representing the second and third highest bids. Chevron offered up $108 million for 75 tracts, followed by BP with $47 million in bids and Shell, with $20 million.
The auction saw 38% higher bids than the previous auction, and also ranks as the highest bidding since 2017.
The Biden administration was forced to move ahead with the controversial auction of 114,000 square miles of oil and gas leases in the Gulf of Mexico due to a climate bill compromise, which prohibits public land leases for renewable power unless oil and gas is first offered tens of thousands of acres.
The outer continental shelf in the Gulf of Mexico is estimated to hold 29.95 billion barrels of oil and 54.85 trillion cubic feet of natural gas in undiscovered technically recoverable oil. It is also estimated that the Gulf of Mexico could produce more than 1 billion barrels of oil and more than 4 trillion cubic feet of natural gas in five decades.
Still, BP, Chevron, and Talos Energy received disappointing results at the beginning of this month from their Puma West-2 appraisal well, which encountered hydrocarbons in multiple zones, but not enough to immediately consider whether to move forward.
The lease sale, the Biden administration’s first in over a year, comes right after the administration approved the controversial Willow drilling project in Alaska.
Responding to the Gulf of Mexico lease sale, Democrat Senator Joe Manchin, who forced the climate bill compromise, said in a statement that the sale demonstrates that the climate bill was “holding this administration’s feet to the fire” in terms of continuing fossil fuel production in the U.S., ABC News reported.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com