Interest Declining In Offshore Acreage Leases

Friday, August 27, 1999
Preliminary results of the latest government sale of offshore oil and natural gas exploration acreage leases in the U.S. Gulf of Mexico show a decline in oil company interest in the properties, officials from the U.S. Mineral Management Service (MMS) said on Tuesday. The latest sale, the Western Gulf Lease Sale 174, received 177 bids from 37 companies on a total of 153 acreage tracts. Bids in the previous sale, held in March, resulted in 272 bids from 67 companies for 207 tracts. The sales are held twice annually, the first for acreage in the central Gulf and the second in the west for acreage offshore Texas and Louisiana. Gulf of Mexico lease sales over the past four years began generating record interest from oil companies after MMS initiated a royalty relief program - a system of tax relief - for companies taking deepwater tracts, according to one MMS spokesman. One 1997 sale received over 1,200 bids on the back of high oil prices. But the most recent cycle of low oil prices, which had led to upstream spending cuts by U.S. firms, a string of mergers and the downsizing activity in the domestic oil patch, has also resulted in a drop in industry interest in lease sales, according to MMS officials. The declining interest could be explained, at least in part, by the fact that a lot of inventory from past sales is unexplored and undeveloped and companies are now focusing on developing those properties before acquiring more acreage, an MMS spokesman said. Of the 153 tracts bid on in this most recent sale, 76 were in water depths of less than 400 meters, 13 were in depths of 400-800 meters, and 64 in deepwater or, depths greater than 800 meters. Details on the sale will be released on Wednesday. MMS will then take a week to determine if all the bids placed for blocks reflect their fair market value. There are 3,647 blocks available for sale at present, according to the MMS.

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