Bidding starts for offshore drilling tracts
www.wilmingtonstar.com NewsletterLast changed: March 19. 2003 2:03AM
The Associated Press Against a backdrop of strong commodity prices, energy companies have filed 793 bids on 561 offshore drilling tracts in the Gulf of Mexico. That's an increase from last year's showing of 697 bids on 506 tracts, according to data from the Minerals Management Service. "It's an increase, and we feel it's a very strong showing," Minerals Management Service spokeswoman Caryl Fagot said. The tracts will be auctioned off in a federal lease sale in New Orleans Tuesday. The increase in bids comes amid a stretch of abnormally high crude and natural gas prices caused by a variety of factors, including uncertainty in the Middle East, an oil-field strike in Venezuela and an unusually cold winter in the Northeast. But the current statistics pale in comparison with lease sales a few years ago. The peak from recent years came in 1997, when energy companies bid on more than 1,000 tracts. Leasing the offshore slots is the first step in oil and gas development. After the leased tracts actually begin producing, companies must pay the government royalties. Many energy companies already hold substantial acreage in the deep-water Gulf. Moreover, many of the best prospects in the Gulf of Mexico already have been leased, leading to the downturn in bidding. "It's an indication companies are struggling to find prospects," said Larry Benedetto, an analyst with Howard Weil, a New Orleans investment bank. "It's not a blockbuster sale." In some cases, energy companies still plan new investment in the Gulf, even if they aren't acquiring the acreage at the lease sale. On Tuesday, Apache Corp. of Houston announced the closing of a $509 million deal to purchase Gulf of Mexico prospects from BP. Apache spokesman Tony Lentini said the company would post only a handful of bids Wednesday. "We probably have as good or better prospects as what's coming" at the sale, Lentini said. "We're not a big participant these days at the lease sales."