For general interest
08:17 DJS Low Oil Prices Fail To Deter Bidding For Gulf Of Mexico Leases
By Christopher Cooper, Staff Reporter of The Wall Street Journal
NEW ORLEANS -- The federal lease sale of oil prospects in the western
Gulf of Mexico brought in higher-than-expected bids, indicating that
unusually
low oil prices have done little to cool the ardor of some companies for
deep-water exploration properties.
The auction for oil-exploration rights fetched $553 million in high
bids for 402 tracts, down substantially from a banner year in 1997, when
companies bid $606 million on 804 drilling blocks in the same geographic
area.
But in terms of cash paid per acre, Wednesda's auction brought in more
money -- something of a surprise given that a barrel of oil is trading
at
near-historic low prices.
The largest bid for a single block was $37 million, on a section of
deep-water acreage about 250 miles south of Galveston, Texas. The
winning
bidder was a consortium of independent companies led by Unocal Corp. and
included Seagull Energy Corp. and British Borneo Petroleum Syndicate
PLC. The
block lies in about 8,000 feet of water and was one of the most hotly
contested in the sale, drawing five bidders, none of which came close to
the
price Unocal offered. Unocal also paid the second-highest price at the
sale --
$31 million -- for a second deep-water tract.
The technology that allows companies to drill in deep water has
expanded rapidly in recent years, and many companies appear convinced
that
technological leaps will continue. The result is that smaller companies
are
venturing into exploration areas that once were dominated by the
industry
giants.
Robert Sevin Jr., land manager for Spirit Energy, a Unocal business
unit, said cheap oil hasn't dissuaded his company from edging into
deep-water
exploration, an endeavor relatively new to the Gulf. While deep-water
drilling
is far more expensive than exploration close to shore, it is also the
most
potentially lucrative. As with most of the U.S., shallow Gulf waters
have been
intensively explored over the years. The true potential for a big strike
lies
in deep coastal waters. Tracts like the one offshore Galveston "are the
ones
our scientists are attracted to," Mr. Sevin said.
Mr. Sevin said that after being outbid on several deep-water tracts
last year, Unocal returned determined to pick up property. Unocal was
the
successful bidder on about 60 blocks, Mr. Sevin said, which would make
it one
of the biggest participants in yesterday's sale.
The auction also included shallow-water properties in the Gulf. Unocal
was the highest bidder on about 15 of these tracts, meaning it was among
the
most active in shallow water as well.
Copyright (c) 1998 Dow Jones & Company, Inc. |
