By September 6, 2016 Read More →

US Gulf Coast blues after meagre Western Lease sale

The underdeveloped infrastructure in the Western Planning Area boosts operator costs, making it even more challenging

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Gulf of Mexico 2016 Western Lease Sale bids Source: Wood Mackenzie

For the fifth consecutive year, the Gulf of Mexico Western Lease Sale bid count has decreased, with only three companies submitting bids this year, according to an analysis by Wood Mackenzie.

Check out the Wood Mackenzie Crude for Thought podcast, in which deepwater Gulf of Mexico experts have an in-depth roundtable discussion on the circumstances of the sale, which blocks were leased, and the bidders’ plans for building their positions.

The challenges of this lower-for-longer oil price environment were front and centre at this year’s Gulf of Mexico Western Lease Sale (WLS), held on 24 Aug.

ExxonMobil, BP and BHP were the only companies to bid this year, with a total of 24 submitted bids and signing bonuses amounting to just US$18.1 million.

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This year’s WLS marked the fifth consecutive year of decreasing bids, as operators continue to decrease discretionary spend and defer exploration.

BHP was the highest bidder this time around, holding to its countercyclical exploration strategy, while Chevron and Shell were notably absent.

With Chevron’s inventory of Lower Tertiary E&A work and Shell’s current focus on the Jurassic trend in the Mississippi Canyon, Wood Mackenzie expects smaller showings from both companies in near-term lease sales.

The comparatively underdeveloped infrastructure in the Western Planning Area boosts operator costs, making it even more challenging for projects to progress in the low-price market.

 

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