Auction of Gulf of Mexico oil parcels sees participation from major oil companies

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Oil Pumping

Oil and gas parcel auction in Gulf of Mexico has seen participation from major oil companies including Royal Dutch Shell plc, Chevron Corp and Exxon Mobil Corp.

The three giants signalled their return after the auction of offshore oil and gas parcels received nearly $275 million in high bids, compared with $156.4 million a year ago.

One of the primary reasons why oil giants have been refraining from going into the deep ocean to extract oil is the continuous decline in oil prices. Further with increased regulatory scrutiny following the Deepwater Horizon disaster in April 2010, the companies have been reluctant to head to the ocean to extract oil.

The five-month-long spill, which spewed some 210 million U.S. gallons (780,000 m3) into the Gulf, caused extensive damage to marine and wildlife habitats, as well as to the area`s fishing and tourism industries, forcing BP to sell assets worth of billions of dollars.

However, it seems that the latest auction for oil and gas parcels in the Gulf of Mexico garnered high bids owing to promises made by US President Donald Trump who has promised to cut permitting and regulatory hurdles in support of energy exploration.

Interest in new deep-water projects is heating up with more favorable costs for drilling rigs, services and production equipment. Shell has cut its well costs by at least 50 percent and reduced logistics costs by three quarters, helping make deep-water projects affordable at crude prices under $50 a barrel.

Shell and Chevron each had 20 high bids, and Shell’s $55.8 million total was the largest among the 26 companies submitting offers. Norway’s Statoil ASA was the second-largest total bidder with $44.5 million, followed by Hess Corp, Chevron and Exxon. The highest bid on a single block this year, from Shell, was for $24 million, almost twice last year`s $13.6 million top offer. Among other top bidders, Exxon submitted 19 high bids totaling nearly $22 million, and Anadarko Petroleum had 16 high bids totaling nearly $19 million.

The bids will be evaluated for the next 90 days by the Bureau of Ocean Energy Management and winners disclosed following the review.

Last month, the Anglo-Dutch oil giant gave final approval to go ahead with its Kaikias deep-water project in the Gulf. In December, BP said it planned to move ahead with a previously delayed expansion project known as Mad Dog Phase 2, the first new platform sanctioned for the Gulf in a year and a half.