Gulf of Mexico oil & gas lease sale pulls off ‘highest bid amount’ in almost a decade, Shell emerges as top bidder

The U.S. government agency Bureau of Ocean Energy Management (BOEM) has held an oil and gas lease sale for acreage in federal waters in the Gulf of Mexico under the Biden administration, gathering close to $382.2 million in high bids, which is the largest amount in the last eight years. The top five bidders, which submitted the lion’s share of bids during the lease sale, are Shell, Anadarko, Repsol, Chevron, and BP. While Anadarko made the largest bid, Shell is by far the highest bidder in this lease sale, when it comes to the total number of bids made by a single company.

Within the results of Lease Sale 261, the U.S. government agency revealed that the sale generated $382,168,507 in high bids for 311 tracts, covering 1.7 million acres in federal waters of the Gulf of Mexico. A total of 26 companies participated in the lease sale, submitting 352 bids totaling $441,896,332. In line with the most recent ruling from the United States Court of Appeals for the Fifth Circuit, BOEM included lease blocks that were previously excluded due to potential impacts to the Rice’s whale population from oil and gas activities in the Gulf of Mexico.  

The top ten companies based on the total number of high bids submitted were Shell Offshore ( 73 total bids and 65 high bids), Anadarko US Offshore LLC (57 total bids and 49 high bids), Repsol E&P USA LLC (46 total bids and 45 high bids), Chevron U.S.A. (32 total bids and 28 high bids), BP Exploration & Production (27 total bids and 24 high bids), Red Willow Offshore (25 total bids and 22 high bids), Hess Corporation (22 total bids and 20 high bids), Woodside Energy (19 total bids and 18 high bids), Houston Energy (18 total bids and 17 high bids), and Equinor Gulf of Mexico LLC (17 total bids and 13 high bids).

Anadarko made the highest bid, totaling $25.5 million, at this lease sale, followed by Hess Corporation (around $21.04 million, $18.04 million, and $17.2 million), and Chevron ($17.2 million). Furthermore, Lease Sale 261 offered 13,482 unleased blocks on 72.7 million acres in the Gulf’s Western, Central, and Eastern Planning Areas.

Revenues received from offshore oil and gas leases, including high bids, rental payments, and royalty payments, are directed to the U.S. Treasury, certain Gulf Coast states – Texas, Louisiana, Mississippi, and Alabama – and local governments, the Land and Water Conservation Fund, and the Historic Preservation Fund. 

Commenting on the results, Holly Hopkins, American Petroleum Institute’s Vice President of Upstream Policy, remarked: “Despite policy headwinds, today’s sale generated the highest bid amount in nearly a decade, demonstrating that our industry is working to meet growing demand and investing in the nation’s long-term energy security. Just as today’s record U.S. production was supported by investment and policy decisions made years ago, new leasing opportunities are critical for maintaining American energy leadership for decades to come.

“Although today’s congressionally mandated lease sale is a positive step after multiple delays, the lack of any offshore sales in the year ahead is a prime example of the administration’s failure to implement a long-term energy strategy. We urge the administration to reconsider its shortsighted approach and plan today for tomorrow’s energy demand.”   

The results follow the Bureau of Ocean Energy Management’s change of date for the latest offshore oil and gas lease sale after it was postponed to comply with a court order. Originally, the lease sale for acreage in the Gulf of Mexico was planned to be held on September 27, 2023, with more than 6 million acres removed from the sale.

However, the American Petroleum Institute (API), Chevron, Shell, and the State of Louisiana filed a motion for preliminary injunction to oppose the reduction in acreage and restrictions on oil and natural gas vessel traffic, seeking immediate action from the court ahead of the planned lease sale. As a result, the court hit the brakes on the attempts to restrict the acreage available for the lease sale on September 21, 2023.

Afterward, the United States sought an emergency stay of the order to allow time for a more orderly lease sale process. As the court’s decision sparked environmental groups’ ire, they appealed the court order granting a preliminary injunction request to remove protections for the Rice’s whale.

Following the United States Court of Appeals for the Fifth Circuit ruling, BOEM put the lease sale on ice for a few days to iron out all the details. A few days later, a new date was set to hold the lease sale on November 8, 2023.

However, the legal challenges for the lease sale did not end there, as another order, issued by the United States Court of Appeals for the Fifth Circuit on October 26, 2023, in Louisiana v. Haaland, led the Bureau of Ocean Energy Management to put off Lease Sale 261 until the court made a ruling since uncertainty surrounded the areas and stipulations that should be included in the sale notice.

Things changed once again following the order issued by the United States Court of Appeals for the Fifth Circuit on November 14, 2023, which required BOEM to hold Lease Sale 261 within 37 days, removed the restrictions on oil and gas vessels, and restored the previously removed acreage. Due to this, BOEM scheduled Lease Sale 261 for December 20, 2023.

This lease sale is the final offshore lease sale mandated by the Inflation Reduction Act and likely to be the only offshore sale scheduled to take place until 2025, as the proposed final program for 2024-2029 offshore oil and gas leasing in the Gulf of Mexico comes with the lowest number of lease sales in U.S. history.

The plan encompasses a maximum of three potential oil and gas lease sales in the Gulf of Mexico area slated for 2025, 2027, and 2029, respectively. These three proposed lease sales are said to be the minimum number that would enable the Interior Department to continue to expand its offshore wind leasing program through 2030 in compliance with the terms of the IRA. The plan entails zero oil and gas lease sales in the Atlantic, Pacific, and Alaskan waters.

Regarding the Biden administration’s approval of the five-year program for federal offshore leasing, Hopkins said: “Simply put, this final five-year program fails to meet the energy needs of the American people and could threaten to increase reliance on foreign energy sources.

“Demand for affordable, reliable energy is only growing, yet the administration is choosing to limit future production in a region that plays a critical role in powering our nation and supplies among the lowest carbon-intensive barrels in the world. This program is a step in the wrong direction for U.S. energy security and will only make it harder to meet growing energy demand over the long-term.”