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Posts Tagged ‘Lease Sale 259’

Correction

Posted in Gulf of Mexico, Offshore Energy - General, tagged , , on April 12, 2024| Leave a Comment »

The table in the Sale 259 bid rejections post has been corrected below. That table incorrectly reported that subsequent bids for Keathley Canyon Blocks 745 and 789 were rejected at Sale 261. Those bids were in fact accepted. Houston Energy was identified as the submitter rather than Beacon Offshore Energy, the company that, per the bidding data, had the largest ownership share. (See the bidding partnership pasted below.)

The acceptance of those 2 bids significantly increases the net gain to the government as a result of the Sale 259 bid rejections. See the corrections in red to the table:

area and blockSale 259 rejected high bid – companySale 261 high bidbid acceptedgovt gain (loss*)
DC 6222,101,836 – Shell615,628 – Shellyes(1,486,208)
GC 173307,107 – Woodsideno bidNA(307,107)
GC 5471,783,498 – Chevronno bidNA(1,783,498)
GC 5911,291,993 – Chevronno bidNA(1,291,993)
GC 642605,505 – Anadarkono bidNA(605,505)
GC 777583,103 – bpno bidNA(583,103)
AT 51,551,130 – Anadarko5,215,628 – Shellyes3,664,498
AT 133607,107 – Woodsideno bidNA(607,107)
KC 745707,777 – Beacon2,422,222 – Beacon Houstonno yes(2,422,222)
1,714,445
KC 789707,777 – Beacon2,143,299 – Beacon Houstonno yes(2,143,299)
1,435,522
WR 794724,744 – Beacon1,487,624 – Beaconyes762,880
WR 795774,242 – Beacon5,301,107 – Woodsideyes4,526,865
WR 796774,242 – Beacon3,310,107 – Woodsideyes2,535,865
WR 750724,744 – Beacon1,498,555 – Beaconyes773,811
total govt. gain1,032,877
8,748,365

More on the Sale 261 bidding next week.

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Sale 259 bid rejections: how did the govt fare?

Posted in CCS, energy policy, Gulf of Mexico, Offshore Energy - General, tagged , , , , , on April 2, 2024| Leave a Comment »

14 of the high bids at Gulf of Mexico Lease Sale 259 were rejected. Did those tracts receive bids at sale 261? What was the net gain or loss of revenue? See the summary bullets and table below

  • 6 of the 14 tracts received no bids whatsoever
  • 5 of the 14 tracts received higher bids that were accepted.
  • 2 tracts received substantially higher bids that were again rejected
  • 1 tract received a lower bid that was accepted
  • net bonus revenue gain to the govt from the bid rejections (pending re-offering at future sales): $1,032,877
  • net bonus revenue gain = 0.27% of the total high bids at sale 261
  • net loss in future rental and royalty payments: ????

For a net bonus revenue gain to date of only 1/4 of one per cent, 8 of the 14 sale 259 tracts with rejected high bids remain closed to exploration. The timing of any future sales is very much in doubt given the minimalist 5 year leasing plan and the associated legal challenges.

Current bid evaluation practices only make sense if regular lease sales are held on a predictable schedule, as has historically been the case.

Meanwhile, 100% of the improper CCS bids (199/199) were accepted at the last 3 oil and gas lease sales.

area and blockSale 259 rejected high bid – companySale 261 high bidbid acceptedgovt gain (loss*)
DC 6222,101,836 – Shell615,628 – Shellyes(1,486,208)
GC 173307,107 – Woodsideno bidNA(307,107)
GC 5471,783,498 – Chevronno bidNA(1,783,498)
GC 5911,291,993 – Chevronno bidNA(1,291,993)
GC 642605,505 – Anadarkono bidNA(605,505)
GC 777583,103 – bpno bidNA(583,103)
AT 51,551,130 – Anadarko5,215,628 – Shellyes3,664,498
AT 133607,107 – Woodsideno bidNA(607,107)
KC 745707,777 – Beacon2,422,222 – Beaconno(2,422,222)
KC 789707,777 – Beacon2,143,299 – Beaconno(2,143,299)
WR 794724,744 – Beacon1,487,624 – Beaconyes762,880
WR 795774,242 – Beacon5,301,107 – Woodsideyes4,526,865
WR 796774,242 – Beacon3,310,107 – Woodsideyes2,535,865
WR 750724,744 – Beacon1,498,555 – Beaconyes773,811
total govt. gain1,032,877
*Loss based on rejected sale 261 high bid. If no sale 261 bid, loss based on sale 259 high bid. These tracts could receive bids at a future sale.

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How did the govt fare on the Sale 259 bid rejections?

Posted in energy policy, Gulf of Mexico, Offshore Energy - General, tagged , , , , , , , , on January 2, 2024| Leave a Comment »

Keathley Canyon and Walker Ridge bids at Sale 259: blue=1 bid, red=2 bids, green=3 bids

Based solely on a comparison of the bids (Sale 261 vs. Sale 259), the Sale 259 rejections were, on balance, to the benefit of the public (table below). On the plus side:

  • Assuming all of the high Sale 261 bids are accepted, the net gain to the US Treasury is $8,749,365
  • Of the 14 tracts with rejected high bids at Sale 259, 8 received bids at Sale 261
  • Seven of those 8 bids were higher than the Sale 259 high bids, and 5 of those 7 were more than $1 million higher.
  • The Sale 259 bid rejections in the Keathley Canyon and Walker Ridge areas proved to be 100% beneficial. All 6 of those tracts received much higher bids at Sale 261.
  • The best BOEM decisions were the rejections of the Sale 259 bids for AT 5 and WR 795 and 796. The Sale 261 high bids on these 3 tracts were $10.8 million higher than the Sale 259 bids.
  • WR 795 and 796 were single bid tracts at Sale 259.
  • AT 5 received 3 bids at Sale 259. BOEM rejected the high bid despite the competitive bidding. That proved to be the right call given that the Sale 261 high bid was $3.5 million higher.

On the other hand:

  • None of the 5 Green Canyon rejections received any bids at Sale 261.
  • The high bid for GC 777 was rejected twice (Sales 257 and 259) at a cost of $1.8 million, the BP/Talos high bid at Sale 257. At sale 259, BP was the sole bidder for GC 777, and their bid was only $583,000, less than 1/3 of their Sale 257 bid. GC 777 received no bids at Sale 261.
  • The worst BOEM Sale 259 decisions were the rejections of the DC 622, GC 547, and GC 591 bids at a cost of $4.6 million ($5.2 if the Sale 261 bid for DC 622 is rejected).
  • This is not to say that the tracts with rejected bids will not ultimately be leased. However, the uncertainty regarding future sales changes the historic GoM leasing dynamic. The next opportunity for purchasing unleased tracts is a troubling unknown. Absent leasing and exploration, their resource and revenue potential will never be known.
area and blockSale 259 high bid – companySale 261 high bidgovt gain (loss)
DC 6222,101,836 – Shell615,628* – Shell(1,486,208)
GC 173307,107 – Woodsideno bid(307,107)
GC 5471,783,498 – Chevronno bid(1,783,498)
GC 5911,291,993 – Chevronno bid(1,291,993)
GC 642605,505 – Anadarkono bid(605,505)
GC 777583,103 – bpno bid(583,103)
AT 51,551,130 – Anadarko5,215,628* – Shell3,664,498
AT 133607,107 – Woodsideno bid(607,107)
KC 745707,777 – Beacon2,422,222 – Beacon1,714,445
KC 789707,777 – Beacon2,143,299 – Beacon1,435,522
WR 794724,744 – Beacon1,487,624 – Beacon762,880
WR 795774,242 – Beacon5,301,107 – Woodside4,526,865
WR 796774,242 – Beacon3,310,107 – Woodside2,535,865
WR 750724,744 – Beacon1,498,555 – Beacon773,811
*The BOEM sale 261 bid summary misidentifies the DC 622 and AT 5 bids as being for MC 622 and GC 5 respectively. The corrected identification above is based on the “Blocks Receiving Bids” file correlated with the block number and company code.

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Lease Sale 259: bid rejections and interesting outcomes

Posted in Gulf of Mexico, Offshore Energy - General, tagged , , , , , , on July 20, 2023| Leave a Comment »

As previously posted, 14 of the 244 (not counting the 69 CCS bids) Sale 259 high bids were rejected. BOEM has published their bid evaluations for all of the tracts, and the 14 rejections are listed below.

lease #blockhigh bid ($)BOEM MROV ($)no. of bids
G37496DC 6222,101,8369,100,0001
G37515GC 173307,1071,300,0001
G37534GC 5471,783,49812,000,0001
G37538GC 5911,291,9935,200,0001
G37543GC 642605,5053,400,0001
G37548GC 777583,1034,200,0001
G37562AT 51,551,1304,700,0003
G37565AT 133607,1072,600,0001
G37616KC 745707,7773,600,0001
G37617KC 789707,7772,100,0001
G37647WR 750724,7443,500,0001
G37646WR 794724,7443,200,0001
G37648WR 795774,2425,000,0001
G37649WR 796774,2424,000,0001
MROV – Mean of the Range-of-Value

Observations:

  • Keathley Canyon (KC) Block 96, the tract receiving the highest bid in the entire sale ($15,911,947 by Chevron), had a BOEM MROV of only $576,000. Clearly, Chevron and the government have a very different view of the value of this tract. BP was the second bidder for KC 96, and their bid ($4,003,103) was also considerably higher than BOEM’s MROV. This one will very interesting to follow.
  • The only bid that was rejected in Sale 257 was the BP/Talos bid of $1.8 million for Green Canyon Block 777. BOEM’s MROV in the Sale 257 evaluations was $4.4 million. BP again bid on GC 777 in Sale 259, but their bid was only $583,000 (even though BOEM’s Sale 257 evaluation was public information). BOEM’s MROV was reduced only slightly to $4.2 million, and they again rejected BP’s bid. We’ll see what happens in the next sale.
  • 51 of the 230 accepted bids were >$1 million, all for deepwater tracts. All of the rejected bids were for deepwater tracts, and a higher percentage (4/14) were >$1 million. This makes sense given that the higher potential prospects are in deepwater.
  • These results demonstrate again that resource evaluation is far from an exact science. BOEM is not selling barrels of oil and cubic feet of gas. BOEM is evaluating prospects, and companies are bidding on the opportunity to explore these prospects.
  • Bidding strategies differ; the more companies participating, the better the long-term prospects for the OCS program.

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Opportunity to formally comment on offshore carbon sequestration is on the horizon

Posted in CCS, energy policy, Gulf of Mexico, Offshore Energy - General, Regulation, tagged , , , , , , , , on July 18, 2023| Leave a Comment »

ENERGYWIRE has reported that the Department of the Interior will publish the legislatively mandated carbon sequestration rule later this year. Given that even close followers of the OCS program were completely unaware of the enabling legislative provisions prior to their enactment, the proposed DOI rule will provide the first opportunity to formally comment.

Within the oil and gas industry and the environmental community, there are considerable differences of opinion about carbon sequestration in general, and more specifically, offshore sequestration. All interested parties are encouraged to submit comments on these important regulations.

Some background information on the sequestration legislation and subsequent actions:

Exxon and other companies intend to commercialize carbon sequestration, and Exxon projects an astounding $4 trillion CCS market by 2050. Such a market will of course be dependent on mandates and subsidies, and the costs will ultimately be borne by taxpayers and consumers.

Is it not a bit unsavory and hypocritical for hydrocarbon producers to capitalize on the capture and disposal of emissions associated with the consumption of their products? Perhaps companies that believe oil and gas production is harmful to society should exit the industry, rather than engage in enterprises that sustain it.

More:

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Lease Sale 259: 14 high bids rejected!

Posted in Gulf of Mexico, Offshore Energy - General, tagged , , , on July 5, 2023| Leave a Comment »

This is a surprisingly high number of rejections given that only one Sale 257 bid was rejected and all 69 of the carbon sequestration bids were accepted (even though such bidding was not authorized).

Specifics on the Sale 259 rejections have not yet been posted, but one of the rejections was bp’s bid for Green Canyon Block 777. This is not terribly surprising given that the bp/Talos GC 777 bid was the sole Sale 257 rejection, and bp’s sale 259 bid was less than 1/3 of their Sale 257 bid.

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BOEM accepts all 69 of the Sale 259 CCS bids

Posted in energy policy, Gulf of Mexico, Offshore Energy - General, tagged , , , , , on June 19, 2023| Leave a Comment »

Last week, BOEM announced the acceptance of all 69 of Exxon’s Sale 259 carbon sequestration bids. This is despite these facts: (1) Exxon’s intentions were known, (2) there were no provisions for CCS bidding in the Notice of Sale, (3) no environmental review of CCS leasing was conducted, and (4) there are no procedures for evaluating CCS bids.

Absent some type of legislative maneuver, carbon sequestration is not authorized under these leases. If Exxon is just acquiring the leases for evaluation purposes in preparation for a possible CCS sale in the future, their lease acquisitions may be okay. If they are planning on retaining these leases for actual sequestration operations, that is not okay, at least not until a competitive process has been established for awarding or reclassifying such leases.

It’s also noteworthy that there was a second bidder for th blocks (in red above). Presumably that company, Focus Exploration, was interested in acquiring the tract for oil and gas exploration purposes. However, the Focus bid was a bit lower, so Exxon got the tract.

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Lease Sale 259 update (as of June 7)

Posted in Gulf of Mexico, Offshore Energy - General, tagged , , on June 12, 2023| Leave a Comment »

Per BOEM’s latest update, 137 of the 313 Sale 259 tracts receiving bids have now been accepted. No decision has been made on the other 176 high bids, including the 69 bids for carbon sequestration purposes. For the reasons previously expressed, I continue to believe those sequestration bids were invalid.

Also, no decision has been made on Green Canyon 777, another block of particular interest.

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Sale 259 intrigue: will the carbon sequestration bids be rejected?

Posted in Gulf of Mexico, Offshore Energy - General, Regulation, tagged , , , on May 30, 2023| Leave a Comment »

BOEM has accepted 76 of the Sale 259 bids to date including 18 of the 29 legitimate (non-CCS) bids for shelf leases.

Interestingly, none of Exxon’s 69 high bids for shelf leases have been accepted to date. Given that the Exxon bids were for tracts that are presumably considered “nonviable” from an oil and gas production standpoint, those bids should have been accepted by now were they deemed to be valid.

Perhaps BOEM, to their credit, is planning to reject the CCS bids as they may when an unusual bidding pattern has been identified. It is now quire clear (unlike in the immediate aftermath of Sale 257) that Exxon was seeking to acquire these leases for carbon sequestration purposes. That is not allowed given that both Sales 257 and 259 were oil and gas lease sales. As similarly noted for Sale 257:

  • Sale 259 was an oil and gas lease sale. The Notice of Sale said nothing about carbon sequestration and did not offer the opportunity to acquire leases for that purpose. Therefore, the public notice requirements for CCS leasing (30 CFR § 556.308) were not fulfilled.
  • Because there was no draft or final Notice of Sale for CCS leases, interested parties and the public did not have the opportunity to consider and comment on CCS leasing, tract exclusions, bidding parameters, and other factors.
  • 30 CFR § 556.308 requires publication of a lease form. No CCS lease form was posted or published for comment.
  • CCS operations were not considered in the environmental assessments conducted prior to the sale.
  • No evaluation criteria for CCS bids have been published.

Meanwhile, the decision on Green Canyon Block 777 will also be of interest, given that a higher Sale 257 bid for this block was rejected.

Finally, there was a second bid (red block below) from Focus Exploration for one of the blocks Exxon bid on (blue). Will that lower bid, which was presumably for oil and gas exploration purposes, be accepted if the Exxon bids are rejected?

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Lease sale 257 challenges finally over?

Posted in Alaska, Gulf of Mexico, Offshore Energy - General, tagged , , , , , on May 5, 2023| Leave a Comment »

That would appear to be the case now that the US Court of Appeals for DC dismissed litigation challenging the sale.

Meanwhile, challenges to Cook Inlet Sale 258 (humble as it was with only one bid) and GoM Sale 259 continue. It’s a great country (if you like endless litigation)!

In addition to Lease Sale 257, the IRA also required Interior to offer three other lease sales in Alaska and the Gulf that it previously declined to hold. Lease Sale 258, in Alaska’s Cook Inlet, was held in December but received only one bid. Earthjustice is challenging that sale. Earthjustice is also challenging Lease Sale 259, in the Gulf of Mexico, which was held in March. Lease Sale 261, also in the Gulf, will be held by September of this year. 

EarthJustice

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