Gulf Coast blues ensue after meagre Western Lease Sale

 

For the fifth consecutive year, the Gulf of Mexico Western Lease Sale bid count has decreased, with only three companies submitting bids this year. We explain more in this week's Crude for Thought podcast, in which our 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 August. 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. Crude for Thought podcast host R.T. Dukes discusses the implications with Gulf of Mexico analysts Alison Wolters and Omar Garza:

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, we expect smaller showings from both companies in near-term lease sales.

Gulf of Mexico 2016 Western Lease Sale bids
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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.

Read more: high-cost hesitations on Alaska LNG, Shell's going … going … GoM sales
You can purchase our full US Upstream Week In Brief on demand to read this week's top stories in the North America Upstream sector, including the Majors' retreat from Alaska LNG; Shell's GoM asset sale; anti-fracking initiatives failing to make the ballot in Colorado; Matador's green-lit Black River cryogenic plant; and Sanchez Energy putting its Eagle Ford assets up for sale.

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