The Trump administration will sell leases for some 77 million acres in the Gulf of Mexico for oil and gas drilling, the largest sale of offshore leases in US history.
Interior Secretary Ryan Zinke said the sale, scheduled for March, would open an area the size of New Mexico to drilling, including all unleased areas on the Gulf’s outer continental shelf. The Gulf’s outer continental shelf is estimated to hold recoverable reserves of more than 48 billion barrels of oil and 141 trillion cubic feet of gas.
The sale would come as the offshore sector continues to struggle and oil exploration and production companies focus investments on lower cost shale fields onshore, particularly the Permian Basin in West Texas. Both Exxon Mobil and Chevron, for example, have spent billions to acquire and develop land in the Permian, one of the nation’s most productive shale plays.
In a report Tuesday, the research firm IHS Markit said that the world’s biggest oil companies have divested offshore holdings and become less active in acquiring new tracts. Overall, IHS Markit said, reduced spending on oil and gas exploration offshore has limited the number of quality oil and gas fields available for acquisition, through either outright sales or mergers.
“Low oil prices have significantly reduced operator spending on exploration — particularly in deepwater, which is very costly,” said Cindy Giglio, an analyst at IHS Markit. “That means fewer deepwater discoveries are made and even fewer world-class assets become available.”
In a statement, Zinke said opening the Gulf’s outer continental shelf to development will aid drillers, under pressure from low prices, by providing more opportunities offshore. An auction of Gulf leases last August attracted more than $120 million in high bids, according to the Interior Department.
Zinke said the leasing program is part of President Donald Trump’s strategy to create jobs and spur economic growth.”The economic terms proposed for this sale include a range of incentives to encourage diligent development and ensure a fair return to taxpayers,” Zinke said.
Many Gulf coast lawmakers and political leaders praised the new lease sale.
This first appeared on the Houston Chronicle – an Energy Voice content partner. For more click here.
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