Gulf of Mexico lease sale 256 – business as usual despite upcoming change in administration

On Wednesday, 18 November, the United States held its region-wide Gulf of Mexico (GoM) Lease Sale 256 and received 105 bids from 23 participating companies, with high bids totalling US$121 million.

Commenting on the results, Mfon Usoro, senior research analyst at Wood Mackenzie, said: "Most companies took the business-as-usual approach even though this could potentially be one of the last lease sale. Although bidding activity increased by 30% from the March sale, the high bid amount of US$121 million still trends below the average high bid amount seen in previous region-wide lease sales, proving that companies are still being conservative with exploration spend.

“Although more Independents showed up to the lease sale compared to March, the increase in bid amount was driven by the Majors and private companies increasing their spend by 39% and 14%, respectively.

“Most notable was EnVen Energy driving bidding in its peer group with US$7.7 million to beef up its Infrastructure-led exploration drilling inventory. Amongst the Majors, Shell, Equinor, BP and Chevron submitted some of the highest bids. Each company claimed high bids of over US$17 million and built on their core positions indicating that the US GoM remains a priority in their portfolios.

“With the Biden administration set to inaugurate next year and possibly ban future lease sales, a massive land grab might have ensued. But companies are constrained by tight budgets due to the prevailing low oil price. Additionally, companies in the region have existing drilling inventory to sustain them in the near term. The best blocks with the highest potential reserves are likely already leased. As a result, we do not expect a potential ban on leasing to materially impact production in the region until the end of the decade.”