By: Keith Magill, HoumaToday.com
Increased bidding on Gulf of Mexico oil leases today sparked optimism amid a downturn that has persisted nearly three years.
“This is good news for American energy, but it’s even better news for Louisiana,” Lori LeBlanc, director of the Louisiana Mid-Continent Oil and Gas Association’s Offshore Committee, said in a news release.
“New and continued investments in the Gulf benefit hundreds of Louisiana oil and gas service companies, thousands of Louisiana workers and our fragile coast that depends on offshore mineral revenues dedicated to coastal restoration.”
The lease sale in New Orleans attracted nearly $275 million in high bids on 163 tracts in federal waters in the central Gulf, according to the U.S. Interior Department. The area spans 913,542 acres in the Outer Continental Shelf off Louisiana, Mississippi and Alabama. Twenty-eight companies, including majors such as Exxon, Chevron and Shell, submitted 189 bids worth about $315 million combined.
High bids were up 76 percent from the $156 million submitted last March. But they were down by half compared to the $539.8 million the federal government received in March 2015.
Nonetheless, the year-to-year increase was seen as positive by regulators and industry officials amid a downturn that has wiped out thousands of jobs throughout Houma-Thibodaux’s oil-based economy and worldwide.
“Today’s strong sale reflects continued industry optimism and interest in the Gulf’s Outer Continental Shelf, a keystone of the nation’s offshore oil and gas resources and a vital part of President Trump’s plan to make the United States energy independent,” U.S. Interior Secretary Ryan Zinke said in a news release.
“In cooperation with the Gulf offshore industry, we are committed to responsible energy development that spurs economic opportunities, generates jobs for American workers and produces revenues for local, state and federal partners,” Zinke said. “Expanded Gulf production is critical to America’s economic and energy security and will play a greater role as we move to break our dependence on foreign oil and strengthen the nation’s energy independence.”
A global glut that forced crude prices down from a peak of more than $100 a barrel in mid-2014 remains despite production cuts OPEC nations enacted in January. Brent crude, the international benchmark, closed at $56.65 a barrel today. West Texas Intermediate, the U.S. benchmark, ended trading at $48.04 a barrel.
Both are down about 15 percent from their 2017 highs in January, partly because U.S. oil inventories continue to rise. Increased drilling in inland shale fields has fueled a resurgence in drilling that has eluded the Gulf of Mexico, where break-even costs are higher. Last week, 19 rigs were drilling in the Gulf, down 58 percent compared to two years ago.
Today’s was the last in a series of a dozen Gulf lease sales that began in 2012 under President Barack Obama’s administration. The first 11 sales offered nearly 73 million acres for development and garnered more than $3 billion in federal bid revenue.
The federal Bureau of Ocean Energy Management estimates the latest sale could result in the production of 460 million to 890 million barrels of oil and 1.9 trillion cubic feet to 3.9 trillion cubic feet of natural gas.
Each bid will undergo a 90-day evaluation process officials say aims to ensure the public receives fair market value before a lease is awarded. Lease awards will be posted to the agency’s website, boem.gov, as they are completed.