Oklahoma-based Kerr-McGee Corp emerged as the biggest spender in a Gulf of Mexico offshore oil and gas lease sale
that raised half a billion dollars, according to the U.S. Minerals Management Service.
Central Gulf lease sale
178 for exploration blocks off the coast of Louisiana, Mississippi and Alabama raised a total of $505.5 million, up from $300.6 million at the previous lease sale for the Central Gulf in March 2000.
Kerr-McGee accounted for more than 10 percent of the total amount raised at the sale in New Orleans, submitting 32 of the high bids with a combined value of $55.9 million.
Oil and gas companies, enjoying increased cash flows as a result of strong energy prices, submitted 780 bids on 547 blocks, up from 469 bids on 344 blocks in last year’s sale. Exxon Mobil Corp., the world’s biggest oil company, submitted the single largest bid of $26.1 million for deepwater block 912 in the Mississippi Canyon area of the Gulf. Chevron Corp., the No. 2 U.S. oil company after Exxon Mobil, submitted the greatest number of high bids by a single company —53 with a combined value of $23.9 million.
Exploration Picks Up
Robust oil and gas prices over the past 12 to 24 months have gradually rekindled oil companies
’ exploration activity, which slowed down considerably as a result of the dramatic decline in oil prices that occurred between late 1997 and 1998.
Although the proceeds of this year’s sale exceeded last year’s, they fell short of the $824 million attracted by the 1997 Central Gulf sale
, when companies made 1,790 bids on 1,032 blocks.
The Gulf of Mexico is regarded as the birthplace of offshore oil and gas exploration and remains one of the industry’s most active offshore provinces, accounting for roughly one-quarter of both domestic natural gas and crude oil production. Gas production is mainly concentrated in shallow water while oil production
has shifted increasingly to deeper waters.
To encourage domestic natural gas production, the latest sale introduced new incentives for companies drilling wells in shallow water to depths of 15,000 feet (4,572 meters) below sea level or greater, and for those seeking gas below thick layers of salt. Royalty relief has also been extended for exploration in waters deeper than 2,624 ft.