By Lukasz Z @ Shutterstock.com
A recent auction of oil drilling rights in the Gulf of Mexico was met with yawns by the oil drilling industry. Only 1% of the land on offer was bid on, and the average paid was $153 per acre. That’s very low. Timothy Puko reports for The Wall Street Journal:
The tepid response shows just how difficult it is for the administration to fulfill its promise of helping the energy industry grow at a time of abundant supplies. A boom in shale drilling has helped set the country on course to become the world’s largest oil producer, but it has also sunk prices and lured drillers away from higher-cost wells, especially offshore.
Mr. Zinke said the sale would be a bellwether for the sector earlier this month at an energy conference in Houston. His department is trying to expand the federal lands it can offer to produce a wide range of commodities—including coal and rare metals, along with oil and gas—and is among several executive agencies trying to roll back rules to lower costs for commodity producers and help them grow.
“Today’s sale is a continuation of our all-of-the-above energy strategy,” said Vincent DeVito, energy counselor to the interior secretary.
But Wednesday’s results, which brought in nearly $125 million plus royalties later—showed no sign that the administration’s moves to spur development could overcome broader market forces, analysts said. Few of the blocks on offer received multiple bids, and the companies bidding focused mostly on small additions they could make to areas they already controlled.
“All the extra acres they offered didn’t really translate to a lot of bidding,” said Imran Khan, a senior manager at energy consultancy Wood Mackenzie in Houston. “We’re not saying it was completely dead. Companies were out there picking up bargains, but it’s just not at the old levels.”
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