Strong interest in Gulf of Mexico

Mar 25, 1997 01:00 AM

Mar. 5, 1997 In the strongest show of interest in over a decade, petroleum companies posted $ 824 mm in high bids for drilling rights in the central Gulf of Mexico.
Smaller independent operators turned out in force to seek 1,032 federally owned tracts, some for deepwater exploration, off the coasts of Louisiana, Mississippi and Alabama, officials said.
Companies issued a record 1,790 bids totalling $ 1.2 bn, the highest for a central Gulf lease sale since $ 1.5 bn in 1985.
Although many of the bids were for deepwater tracts, there also was good interest in drilling in shallower waters.
Petroleum operators have been returning to the Gulf during the past three years. They have been encouraged by higher oil and natural gas prices and federal royalty relief that provides more tax breaks the deeper an offshore well is drilled. In addition, other coastal areas of the United States are under drilling restrictions that have virtually shut down exploration and production. But an industry analyst cautioned the development. Explorers face a lack of rigs, support equipment and qualified workers _ the result of sharp cutbacks in the late 1980s and early 1990s.
"Because of the activity in this sale today, this industry needs to start expanding its capacity or a lot of the tracts may go undeveloped," said Matt Simmons, president of Houston-based Simmons & Co.
After leases are awarded, companies generally have five years to start drilling in shallow water, 10 years in deep water.
There was a strong showing by companies that worked in the North Sea. Those companies are familiar with technology that could move along deepwater drilling in the Gulf.

Source: not available
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