Lease sale shows shallow waters in Gulf of Mexico are back: BOEM chief


06 24, 2012 by Platts

The director of the US federal agency in charge of offshore oil and gas leasing said Sunday that what struck him most about the recent Central Gulf of Mexico lease sale was the interest in drilling on the continental shelf, as opposed to just interest in the deepwater Gulf.

Tommy Beaudreau, the director of the Bureau of Ocean Energy Management, noted that "there's been that belief that the shallow water was dead." But instead, "we got bids on nearly 200 lease blocks," he told the television program Platts Energy Week.

Shallow waters in less than 200 meters depth received 193 bids this year, compared to 151 tracts in the most recent Central Gulf of Mexico auction two years ago.

Beaudreau cited the bids of Apache and Chevron in particular. Chevron bid on a total of five blocks in the Grand Isle and West Delta areas, and Apache returned to the shelf after a five-year absence by submitting several bids. Although Beaudreau didn't cite it by name, ConocoPhillips sought acreage in the Viosca Knoll in seven bids.

The sale took in total apparent high bids of $1.7 billion, with BOEM describing it as the fourth most successful sale in history. This was the first Central Gulf of Mexico lease sale since the one that occurred about a month before the Macondo blowout, and Macondo is in the Central Gulf.

In this sale, BP, the operator at Macondo, submitted total bids of $3.5 million. Beaudreau answered "yes" to the question of whether BP can drill safely.

"We put a lot of scrutiny on BP following the spill," he said." "We raised our standards, and BP must comply with them. BP also has undertaken a number of voluntary measures, like requiring outside verification of their cementing procedures."

DELAY IN LEASE LAUNCH DEFENDED

Improper cementing has been identified as a key reason for the Macondo blowout. "I have a genuine belief that BP is sincere about operating safely," Beaudreau added.

The BOEM director defended the amount of time it took to get this lease sale off the ground. The Department of the Interior did conduct a lease sale for the Western Gulf of Mexico in late 2011, but it is the Central Gulf of Mexico that always draws the most interest. For example, the sale in December didn't even attract total bids of $750 million, compared to total bids in the Central sale in excess of $2 billion.

The criticism in the pace of sale also has come from environmental groups, who in some cases sought a further delayed sale.

"We delayed the sale, and the reason was to take the time necessary to implement these heightened standards and evaluate information from the spill," Beaudreau said.

But the results of the sale were seen by Beaudreau as vindicating that approach. "I think with what we've seen with the pickup of activity in the Gulf that the industry has stepped up and they can comply with our standards," he said.

He also defended the amount of time needed to secure permits. "We've refined our processes and our overall plan review, and permitting times have come down because of operator compliance and efficiency in our processes," Beaudreau said. "But compliance is the key."

"Platts Energy Week" airs Sundays in Washington at 8 am on WUSA and in Houston at 4 pm (both local times) on the PBS channel KUHT. The show is also available online at www.plattsenergyweektv.com.

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