Offshore oil companies are buying up leases in the U.S. Gulf of Mexico as they expect to face new regulations under the incoming Biden presidency.
The last federal auction under the Trump administration for leases in the U.S. Gulf of Mexico netted about $120 million, an improvement over the March auction that resulted in $93 million. The bidding at the Wednesday auction exceeded expectations, given the oil downturn driven by the coronavirus pandemic, according to S&P Global Platts, an energy research firm
“One of the main likely drivers behind the slightly better-than-expected performance of Lease Auction 256 is the looming regulatory uncertainty that will come along with a change of a US administration next year,” said Sami Yahya, Platts’ senior energy analyst. “The Biden administration discussed plans to ban drilling on federal lands, which may have led some operators to jump at the chance of securing more blocks before the window becomes limited in the future.”
Oil and gas companies that drill heavily on federal lands and waters are preparing for new regulations and restrictions under the incoming Biden presidency by applying for more drilling permits and building up a deep inventory of leases on federal property. Biden campaigned on the promise of banning drilling on federal property in an effort to curb the effects of climate change.
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Under the Trump administration, the federal government has held two annual auctions since 2017, putting 78 million acres of federal property up for oil and gas leases. The Bureau of Ocean Energy Management delayed the August auction to November because of the pandemic.
Twenty-three oil companies submitted 105 bids for federal leases on Wednesday, up from 22 oil companies submitting 84 bids in March. By contrast, 30 oil companies submitted 257 bids in March 2019 with the number of high bids totaling $244 million, Platts said.
Although the latest auction slightly exceeded expectations, it remained a far cry from auctions held before the 2014-16 oil bust, when leases used to net more than $1 billion in high bids, Platts said.
Most of the federal property that received bids this week are close to active leases, which allow operators to use existing nearby pipelines and rigs to drill for oil more cheaply than developing a project farther away.
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November 19, 2020 at 09:07PM
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Oil companies stock up on offshore Gulf of Mexico leases before Biden takes office - Houston Chronicle
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