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Oil companies pony up for right to drill nearer Florida
By DAVID BALLINGRUD NEW ORLEANS -- An hour before the first oil lease sale in the eastern Gulf of Mexico in 13 years, Alex van den Berg, manager of gulf exploration for Shell Oil, picked nervously at his breakfast. On his mind was a 5,760-acre patch of sea bottom south of the Florida Panhandle called Block 399. "That's the one I want," van den Berg said. "I put $22-million on that one -- that's the one I'm puckered up about." Two hours later, in the Versailles Ballroom at the Riverside Hilton Hotel, van den Berg thrust his fist in the air and whooped as Shell's $22,135,759 bid nipped a $21,025,440 offer from an aggressive competitor, Anadarko Petroleum of Houston. Shell's win-at-the-wire of Block 399 highlighted Wednesday's long-awaited Lease Sale 181 -- a busy day of intrigue and dealmaking, joy and disappointment, as the oil industry tried once again to edge nearer to Florida in its never-ending search for oil and gas. And while Sale 181 was small compared with earlier sales in the central and western gulf, the checkbooks were open wide as 17 companies made bids. The winners totaled more than $340-million. "A smashing success ... a good, strong sale," said Chris C. Oynes, director of the Minerals Management Service's Gulf of Mexico Region. The MMS is part of the U.S. Department of the Interior, and is second only to the IRS in revenue generated for the federal government. It provides about $2.5-billion per year to the states, the national treasury and various conservation funds. "It's as if we've been peering over the fence for the last 13 years, with great opportunities just out of reach," said Anadarko CEO Robert J. Allison. "Finally, the fences are coming down." Not everyone was pleased with the day's events, however. Frank Jackalone, the Sierra Club's Florida staff director who was in New Orleans to protest the sale, said the sale is just one step in a long process, and the fight against drilling in the Lease 181 area will continue. "We're disappointed," said Jackalone of St. Petersburg. "The sale opens up an enormous new area of the gulf, and creates a kind of oil company feeding frenzy. Every new drilled hole is an increased risk of a spill. "We will oppose it politically, and legally, if have to." The leases, on blocks of sea bottom approximately 5,000 acres each, are valid for 10 years, and not every block that is leased will eventually have a drilling platform on it. An exploratory well often convinces a company that production would not be economically sound, and in that event the block reverts back to the government when the lease expires. About 40 percent of the land offered for sale actually received bids. Anadarko, a publicly traded company that focuses on exploration and production, anticipated starting to drill within about a year. "We have gathered and interpreted an extensive amount of information about these blocks, and we're convinced they hold substantial oil and gas reserves," Allison said. "Since a lot of the preliminary work has already been completed, the prospects can be drilling relatively soon -- as soon as late 2002." Shell representatives said they hoped to begin drilling a well in the Sale 181 area within a year also. The MMS seeks state comments before issuing the final permits to drill, however, and it is in that process that Jackalone promised the Sierra Club and others who oppose drilling will be heard. A lot of money 'left on the table'Politics was far from an oil man's mind on Wednesday, however. Wednesday was about money and competition. Lease Sale 181 went well for Shell, or seemed to, as the company succeeded on 28 of its 48 bids, spending just a little short of $110-million. The real value of a block can't be determined until it is drilled, so excitement over success at a sale tends to be brief. "I am ecstatic in a subdued sort of way," said van den Berg. Anadarko Petroleum was the big spender for the day, successful on 26 bids with a total value of $136-million. No company wants to spend more than it takes to win a particular block. Too much of this "money left on the table" causes a lot of second-guessing, and Anadarko came in for some Wednesday. Its bids were often markedly higher than other companies', prompting numerous murmurs of surprise and even some chuckles from some of the several hundred oil men and women at the sale. A company representative who attended the sale would not discuss the bids, but a spokeswoman in Houston later said the company was pleased. "We worked the data thoroughly and we're happy with the results," said Lee Warren. "The bids were consistent with our interest, and we believe we bid fair value." Some other bids raised eyebrows, too. Shell looked smart trumping Anadarko's $21-million bid on Block 399 with a $22-million bid of its own, but caused murmurs of surprise by making the only bid on Block 446 -- for $21-million. "We'll get over it in a few days," said van den Berg, who hinted that Shell had spotted potential others had overlooked. Companies seem to accept the wildly divergent estimates of value with a shrug. "If you're going to be in the game, you have to take a seat at the table," said John L. Shepard, Shell's exploration manager in the eastern gulf. "We're in the oil business, and we have to look for oil."
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From the Times wire desk Susan Taylor-Martin
From the AP |
