US auctions first Gulf of Mexico Oil and Gas since 2023
On Wednesday, the Trump administration will conduct the first government sale of oil-and-gas drilling rights in Gulf of Mexico?since 2023. This is a test of the industry's appetite?for offshore acres at a moment when the United States?is trying to increase domestic fossil fuel production.
The auction is one of the 30 required by President Donald Trump's tax-cut and spending bill that he signed in July. His administration's plans are a major departure from those of his predecessor President Joe Biden. He had planned a historically?limited number of oil-and-gas auctions in an effort to shift away?from?fossil fuels and tackle climate change.
The U.S. Bureau of Ocean Energy Management has offered to lease 81.2 million acres of?the Gulf for a 12.5% royalty rate, the lowest allowed by 'Trumps new tax law. As mandated by Biden’s 2022 Inflation Reduction Act oil companies had to pay 16.66% as royalties to U.S. Treasury and states.
Trump's new law reduced the rate in order to encourage more industry participation. U.S. crude prices have fallen by about?20% in the past year. This can limit drillers' investment, but technological advances in deep-sea oil drilling should help boost Gulf?production.
The offshore production of the United States is about 15%, but it has been lagging behind onshore shale fields in recent years due to longer timelines and greater upfront costs.
According to pre-sale stats?on the BOEM site, 26 companies made a total of 219 bids for 1.02 million acres. This is about 1.3%.
On Wednesday morning, the bids will be live-streamed at BOEM's site.
In 2023, the last Gulf sale attracted 352 offers from 26 companies for 1.73 million acres. The sale raised $382m, the most of any federal lease sale offshore since 2015. Bill Berkrot edited the report by Nicholae Groom.
(source: Reuters)
