E&E: Next Gulf lease sale includes plots along Mexico border

Nathanial Gronewold, E&E reporter
Published: Monday, July 21, 2014

HOUSTON — The federal government has put the oil and gas industry on
notice to prepare for the next round of offshore lease bidding, to
cover waters off the coast of Texas.

And for the first time, the government is accepting bids on leases for
offshore oil and gas prospects along the maritime border with Mexico.

On Friday the Bureau of Ocean Energy Management (BOEM) released details
of its planned sale of offshore leases in federal waters. The sale is
for acreages in the western Gulf of Mexico, in the federal government’s
Western Planning Area (WPA) for offshore energy development in the

“The decision to move forward with this lease sale follows extensive
environmental analysis, public input and consideration of the best
scientific information available,” acting Director Walter Cruickshank
said in a release.

Over 20 million acres is up for grabs in sale 238, scheduled to be held
Aug. 20 at the Superdome in New Orleans. The government’s last lease
round for the WPA was in August 2013 and netted the government a little
over $100 million.

What makes this lease different is that it stretches far south to just
north of the U.S.-Mexico maritime border. Activity was forbidden in a
buffer zone created around the international boundary pending the
completion of a treaty between the two nations clarifying how offshore
energy exploration and production would be pursued in the Gulf’s

The U.S. and Mexico have since finalized a treaty on Gulf energy
exploration, so BOEM says it’s removing the prior restrictions in
place. The offshore energy treaty with Mexico has now entered into
force as of last Friday.

“As such, whole and partial blocks in the 1.4-nautical mile buffer area
will be offered for lease in WPA Sale 238,” the agency said in its
package of details covering the drilling rights sale.

The WPA is the least developed portion of the Gulf’s offshore drilling
industry, with most activity found off the coast of central and
southeastern Louisiana. Though it is home to substantial numbers of
shallow-water operations, new leasing in this area is focused on
deepwater and ultra-deepwater regions, in formations where companies
have found success.

The length of time that a lease can be held depends on the depth of the
water column it’s lying in. Leases for exploring deepwater prospects
that are more than 5,200 feet deep are good for 10 years. Standard
leases remain valid for five to seven years, but companies can earn
three-year extensions if they spud a well in the acreage they are
holding before that lease expires.

BOEM is almost halfway through its five-year lease sale schedule, which
is ending in 2017. After next month’s round the agency will hold six
more lease sales for Gulf of Mexico acreage: three for the Central
Planning Area, one for the Eastern Planning Area and two more for the
western Gulf off Texas.

Offshore drillers are more active in the Gulf now than they were at the
time of the 2010 Macondo well blowout and oil spill, when a drilling
moratorium was put in place. With new production coming online this
year and next, some analysts are predicting a sharp jump in Gulf oil

output starting in 2015 (EnergyWire, July 14).
Special thanks to Richard Charter
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