Deepwater tracts star in Gulf oil tract auction

[November 29, 2012]  NEW ORLEANS (AP) -- Deep water got nearly all the bids in third federal oil and gas lease in the Gulf of Mexico since the BP oil spill.

Of $133.8 million in winning bids, only $4.6 million was for areas less than a half-mile underwater. Chevron USA Inc. and ConocoPhillips Co. led a group of companies that made 131 bids for 116 tracts in the western Gulf.

That brings total lease sales in the Gulf to more than $2 billion over the last 12 months. Before that, lease sales were halted as the federal government scaled back production and imposed sweeping new safety measures and requirements following the Deepwater Horizon disaster in April 2010.

Recent huge discoveries producing 100,000 to 200,000 barrels a day, such as BP PLC's Thunder Horse field and Shell's Perdido field, have been in deep water, said Erik G. Milito of the American Petroleum Institute.

"That's where the focus is," he said.

Neither BP nor Shell was among the 13 companies that submitted bids for Wednesday's sale.

Chevron USA had two of the day's highs: a total of $56 million in high bids, and the largest single bid. That $17.2 million bid topped offers of $11.3 million by Anadarko US Offshore Corp. and $11.3 million by Exxon Mobil Corp. for the same tract. It was the farthest west of four tracts in a row for which Chevron had high bids totaling nearly $38.2 million.

ConocoPhillips had more high bids, 62 to Chevron's 28, for a total of $51.7 million.

Overall, the Bureau of Ocean Energy Management offered about 20 million acres in the western Gulf, off Texas and extreme western Louisiana and got bids for about 652,500 acres. Seventy tracts are at least half a mile deep, and 35 others are nearly a mile under water.

Production in the Gulf is still below the levels forecast before the 2010 oil spill. Geoffrey Brand, senior economic adviser for the American Petroleum Institute, an industry trade group, said output is about 29 percent below the 1.76 million barrels a day that the federal Energy Information Administration had predicted for 2012.

U.S. Sen. David Vitter, R-La., said the moratorium imposed by the government after the BP oil spill has cost the U.S. money.

"There is no disputing the fact that our nation's domestic energy production on federal lands is far lower than what was projected before this administration took office, and is trending in the exact opposite direction of the rapid growth we're seeing on private and state lands," Vitter said.

The western region's previous sale, last December, brought more than $324 million in leases. The central Gulf, the region where BP's Macondo well was located, is a much more attractive area for drillers. An auction for that region in June brought in $1.7 billion in high bids, the fourth-largest amount for that region since 1983 and $751 million more than the one for the same area in March 2010, a month before BP's Macondo well blew out.

BP had $239.5 million in winning bids in the June lease sale.

The bureau rejects bids considered below fair-market value. It rejected 22 of June's 454 high bids as too low. It will be months before it decides if any of Wednesday's bids will be rejected.

The idea of setting a fair market value for the tracts interested members of an energy delegation from Myanmar, who questioned BOEM official Thierry DeCourt through a translator before the sale.

About 3 percent to 5 percent of all bids are rejected as "grossly underbid," he told the group.

The Environmental Protection Agency's suspension of new federal contracts for BP on Wednesday had nothing to do with its not bidding, said John Rodi, BOEM's regional director for the Gulf of Mexico.

[Associated Press; By JANET McCONNAUGHEY]

Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.