Chevron, Bp, Equinor Top $309mm Gulf of Mexico Auction

Chevron U.S.A. Inc. offered seven of the 10 highest bids for drilling rights in a Gulf of Mexico auction Wednesday that attracted $309,798,397 in totala sale mandated by last years climate compromise act.

BP Exploration & Production Inc., Equinor Gulf of Mexico l.l.c. and a multi-member bid group round up the top 10 single highest bids for Lease Sale 259. Ordered by the 2022 Inflation Reduction Act (IRA) to be held by March 31, 2023, the auction offered 313 tracts totaling 1.6 million acresroughly the size of Delaware statein federal waters. Offers deemed high bids by the Bureau of Ocean Energy Management (BOEM), which received bid submissions from 32 companies, totaled $263,801,783.

The latest BOEM assessment, conducted 2021, estimated the Gulf of Mexico outer continental shelf holds 29.59 billion barrels of oil and 54.845 trillion cubic feet of gas in mean levels of undiscovered technically recoverable resources.

Keathley Canyons Block 96 received the highest single bid, by Chevron at $15,911,947. The same company submitted the second and third biggest offers, for Green Canyons Block 724 at $10,891,423 and Green Canyon 160 at $7,123,712, as well as the sixth to ninth highest bids.

BP offered the fourth highest bid, for Keathley Canyons Block 340 at $6,503,103. A bidding group comprising Beacon Offshore Energy, Exploration l.l.c., Houston Energy l.p., Red Willow Offshore l.l.c. and Westlawn GOM Asset 1 Holdco l.l.c. had the fifth highest, for Mississippi Canyon Block 804 at $5,025,777. Equinor offered the 10th largest bid, for Walker Ridge Block 148 at $3,099,199.

In terms of total high bids, Chevron was the biggest name placing $107,957,492, followed by BP at $46,609,286 and Shell Offshore Inc. at $20,147,556.

An IRA provision prioritizing fossil fuels prohibits a lease for the offshore development of wind energy unless an offshore lease sale has been held during the one-year period ending on the date of the issuance of the lease for offshore wind development. Another condition requires for total acres offered in offshore lease sales in the year till the issuance of any lease for offshore wind development to reach 60,000,000 acres.

Leases awarded under Lease Sale 259 for water depths 2,624.67 feet or shallower have an initial term of five years. Deeper drillings win an initial 10-year contract.

Leases resulting from this sale will include stipulations to mitigate potential adverse effects on protected species and to avoid potential conflicts with other ocean uses in the region, the BOEM said.

Revenues received from offshore oil and gas leases (including high bids, rental payments, and royalty payments) are directed to the U.S. Treasury, certain Gulf Coast states (Texas, Louisiana, Mississippi and Alabama) and local governments, the Land and Water Conservation Fund and the Historic Preservation Fund.

The next auction for drillings in Gulf of Mexico is scheduled September 2023, for Lease Sale 261.

Gulf of Mexico Oil and Gas Lease Sale 261 would offer approximately 13,620 blocks on 73.4 million acres on the U.S. Outer Continental Shelf in the Western, Central, and Eastern Planning Areas, the BOEM said in a news release March 10.

Climate Compromise

The IRA, passed August 2022, is touted as a climate compromise law seeking to strike a balance between energy security and climate resilience. The legislation aims to fast-track or incentivize the development of both fossil fuels and renewables such as wind energy, among other provisions.

The Interior Department announced February what it called the first-ever offshore wind lease sale in the Gulf of Mexico. Bidders have until April 25 to forward their qualification materials to the BOEM.

The Proposed Sale Notice (PSN) announced today includes a 102,480-acre area offshore Lake Charles, Louisiana, and two areas offshore Galveston, Texas, one comprising 102,480 acres and the other comprising 96,786 acres, the department said in a press release February 2022.

Along with investments from the IRA and the Bipartisan Infrastructure Law, the planned sale will spur offshore wind deployment beyond the East Coast, boost American leadership on floating offshore wind technologies, and create good-paying jobs for workers throughout the nation, the White House said in a release the same day.