Offshore Leases Fetch $810M in Bids
By ALAN SAYRE
.c The Associated Press
NEW ORLEANS (AP) - Despite a slump in oil prices, petroleum companies posted $810.4 million in high bids Wednesday for drilling rights in federal offshore leases in the central Gulf of Mexico.
The figure was only slightly off last year's $824.1 million tally for tracts, many for deepwater exploration, off the coasts of Louisiana, Mississippi and Alabama.
''Two-thirds to three-quarters of the leases were sold in deep water,'' said Robert B. Stewart, president of the National Ocean Industries Association, a petroleum industry trade group. ''It's really what they (oil companies) think the price will be five or 10 years from now.''
Stewart also said interest in deepwater production remained strong because production from the Gulf of Mexico has been about two-thirds natural gas. Natural gas prices have remained steady, despite the slide in oil prices that began in November.
During last year's central Gulf sale, companies posted a record 1,790 bids on 1,032 tracts, valued at $1.2 billion. This year, 1,188 bids totaling $1.35 billion were submitted for 794 tracts.
Conoco Inc. submitted the largest number of high bids, 122. Statoil Exploration Inc. submitted the highest bid for a single tract, $28 million for an area in deep water about 100 miles south of Grand Isle.
Stewart said he was somewhat surprised by the size of some of the single bids. Three bids exceeded $23 million, while all of the 10 highest bids exceeded $11 million.
''It tells me the companies' long-term prospects for commodity prices are optimistic,'' Stewart said.
Even if prices for light sweet crude hovers around $12 to $13 per barrel, deepwater wells can still make money, Stewart said. For example, a typical on-land well can generate about 15 barrels of oil per day. One producing well in the Gulf currently is turning out 29,000 barrels per day, he said.
''You can make money at $13 per barrel when you are getting that kind of volume,'' Stewart said. ''These are volumes that are normally associated with the Persian Gulf. They are huge.''
The agency will formally award the bids after checking them for fair market value. Typically, 2 percent to 3 percent of the high bids are rejected, officials say.
AP-NY-03-18-98 1618EST
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