Success of 216/222 Lease Sale in the US Gulf of Mexico Proves that Deepwater Drilling Remains Popular

Thursday 8 November 2012, Amsterdam

Deepwater drilling is making a swift recovery in the US Gulf of Mexico (GoM), and the success of the 216/222 lease sale in central GoM has helped to reaffirm interest from oil and gas giants, states a new report by industry experts.

The new report shows that the deepwater GoM continues to play a vital role in the US’s energy security, contributing substantially to the country’s total oil production. The Deepwater Horizon rig destruction and subsequent oil spill in April 2010 had a massive impact on exploration and production activities, as the US government imposed a temporary moratorium and investments ground to a halt. Despite this, an incredible recovery can be seen from new lease sales occurring over the last few months.

The deepwater GoM boasts large-scale, commercially exploitable quantities of hydrocarbons, and consequently forms part of the “golden triangle” with other deep offshore discoveries in West Africa and Brazil. Exploration of hydrocarbons in the deepwater GoM started in the 1970s, when declining exploration activity in the GoM’s shallow waters led operators to search further out at sea, and new deepwater discoveries have re-established the potential of GoM numerous times since then.

The latest 216/222 lease sale in the Central GoM in June 2012 was extremely successful, with the US government receiving $1.7 bn from the winning bids. High oil prices, recent deepwater discoveries in the area, and pent-up demand for exploration tracts in the GoM worked to make this lease sale a victory. In total, 56 oil and gas companies submitted 593 bids for 454 tracts in Central GoM, over a total area of more than 2.4 million acres. Statoil Gulf of Mexico LLC presented the highest recorded bid for a single lease, with a $157m bid for a block in the Mississippi Canyon area. The success of lease sale proves that oil and gas companies still hold interest in the exploration of the GoM, and are confident about meeting the new regulations imposed in the wake of the Deepwater Horizon rig tragedy.

Crude oil and natural gas production in deepwater GoM increased at an Average Annual Growth Rate (AAGR) of 1.6% during 2007–2011, from 504.1 million barrels of oil equivalent (MMboe) in 2007 to 536.6 MMboe by the end of 2011. Production is expected to increase at an AAGR of 2.2% during 2011 to 2020, to reach 657.0 MMboe by the end of 2020.

This report provides an overview of the deepwater oil and gas exploration and production (E&P) activities in the US Gulf of Mexico (GoM). It also provides information on investors’ interest in the US GoM, impact of Deepwater Horizon rig incident on the E&P activities in the GoM, and E&P companies operating in deepwater GoM.

This report was built using data and information sourced from proprietary databases, primary and secondary research, and in-house analysis conducted by a team of industry experts.