1 of 2 | Oil majors flocked to the first auction for drilling in the Gulf of Mexico, with Chevron coming in with nearly half of the total high bids. File photo by Stephen Shaver/UPI | License Photo
March 30 (UPI) -- Results from the first auction for drilling rights in the U.S. waters of the Gulf of Mexico in more than a year show the region is primed for growth, analysis finds.
More than 70 million acres of maritime acreage in the Gulf of Mexico was put on the auction block on Wednesday. The federal government reported that 32 companies offered bids totaling $309 million.
U.S. supermajor Chevron was the most active bidder, offering $104 million in high bids in Lease Sale 259, the first such auction in more than a year.
Provisions in the Inflation Reduction Act mandated the lease sale. U.S. President Biden had opposed new drilling when he entered office in 2021, but political pressure and energy security measures stemming from the war in Ukraine led to a course change.
Bids for Wednesday's lease sale were 38% higher, or $72 million, more than the previous lease sale in 2021.
Justin Rostant, a principal research analyst at Wood Mackenzie, said in a statement emailed to UPI that the most recent lease sale was far more successful than past years.
"The majors participated in a big way at the lease sale, bidding on 70% of the 313 blocks and their high bids were 77% of the total," he said. "We expected to see an uptick in the activity as it has been almost 18 months since the last lease sale."
The latest federal data show the Gulf of Mexico produces around 1.7 million barrels of oil per day, compared with about 12 million bpd for the entire country. Total gas production accounts for about 15% of the national total.
Supporters of offshore oil and gas add that U.S. deepwater production is among the lowest in the world in terms of carbon intensity.
"The technologies used in deepwater production -- which represents 92% of the oil produced in the U.S. Gulf of Mexico -- place this region among the lowest carbon intensity oil-producing regions in the world," said Erik Milito, the president of the National Ocean Industries Association.
The lease, meanwhile, could be a frustration for U.S. President Joe Biden, who recently sanctioned the controversial Willow oil project in the Alaskan tundra. Groups like the Sierra Club said projects like these undo progress already made in the fight against climate change.
The American Petroleum Institute, a group representing the business interests of the private U.S. energy sector, said it wanted more, however. API said it's been nearly a year since the federal government allowed a mandated five-year lease program to lapse.
"Continued production in the Gulf of Mexico is essential for delivering the energy the world needs while supporting lower carbon goals, but U.S. energy producers need certainty from policymakers in order to meet the growing energy demand," Holly Hopkins, API's vice president of exploration and production, said.