US Gulf of Mexico Oil & Gas Lease Sales Attract $137 Million in Bids

The U.S. Bureau of Ocean Energy Management (BOEM), a division of the Department of the Interior, conducted a lease sale on nearly 76 million acres of federal offshore parcels in the U.S. Gulf of Mexico. The results, a total of $137 million in received bids, were modest at best.

According to the BOEM report of the sale, the government received a total of 99 bids on just 508,096 acres from 27 companies participating in the lease sale. The block (a three-mile by three-mile parcel) receiving the highest bid was located in the Garden Banks region and the winning bid, by Total S.A.'s (TOT) U.S. division, totaled $12.1 million.

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The winning bids, called bonus payments, give the company the right to develop the block for a period of time, usually 10 years on a deepwater (between 800 and 1,600 meters deep) block. In addition to the bonus payment, the company pays an annual rental fee until production begins, when the company pays a federal royalty rate of 18.75% on production for wells in water deeper than 200 feet and 12.5% on shallow water production.

Of a total of 90 sales, 10 were made on blocks with a 12.5% federal royalty rate and the rest were made on blocks commanding the 18.75% rate. Blocks with lease terms of five years received 14 bids, while those with lease terms of seven and 10 years received 34 and 42 bids, respectively.

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For this sale, BOEM reduced the royalty rate on shallow water leases from 18.75% royalty rate proposed by the Obama administration when the sale was announced to the 12.5% rate. The agency said that the "fiscal terms … take into account market conditions and ensure taxpayers receive a fair return for use of the OCS [outer continental shelf]."

The five companies or their subsidiaries spending the most on new leases were:

• Chevron Corp. (CVX): $27.92 million on 15 high bids

• Royal Dutch Shell PLC (RDS-B): $25.1 million on 19 high bids

• Exxon Mobil Corp. (XOM): $20.39 million on seven high bids

• Total: $16.8 million on six high bids

• Anadarko Petroleum Corp. (APC): $10.6 million on 10 high bids

Visit the BOEM website for full details of the sale.

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