The U.S. Bureau of Ocean Energy Management (BOEM), a division of the Department of the Interior, conducted a lease sale on nearly 76 million acres of federal offshore parcels in the U.S. Gulf of Mexico. The results, a total of $137 million in received bids, were modest at best.
According to the BOEM report of the sale, the government received a total of 99 bids on just 508,096 acres from 27 companies participating in the lease sale. The block (a three-mile by three-mile parcel) receiving the highest bid was located in the Garden Banks region and the winning bid, by Total S.A.’s (NYSE: TOT) U.S. division, totaled $12.1 million.
The winning bids, called bonus payments, give the company the right to develop the block for a period of time, usually 10 years on a deepwater (between 800 and 1,600 meters deep) block. In addition to the bonus payment, the company pays an annual rental fee until production begins, when the company pays a federal royalty rate of 18.75% on production for wells in water deeper than 200 feet and 12.5% on shallow water production.
Of a total of 90 sales, 10 were made on blocks with a 12.5% federal royalty rate and the rest were made on blocks commanding the 18.75% rate. Blocks with lease terms of five years received 14 bids, while those with lease terms of seven and 10 years received 34 and 42 bids, respectively.
For this sale, BOEM reduced the royalty rate on shallow water leases from 18.75% royalty rate proposed by the Obama administration when the sale was announced to the 12.5% rate. The agency said that the “fiscal terms … take into account market conditions and ensure taxpayers receive a fair return for use of the OCS [outer continental shelf].”
The five companies or their subsidiaries spending the most on new leases were:
- Chevron Corp. (NYSE: CVX): $27.92 million on 15 high bids
- Royal Dutch Shell PLC (NYSE: RDS-B): $25.1 million on 19 high bids
- Exxon Mobil Corp. (NYSE: XOM): $20.39 million on seven high bids
- Total: $16.8 million on six high bids
- Anadarko Petroleum Corp. (NYSE: APC): $10.6 million on 10 high bids
Visit the BOEM website for full details of the sale.