Gulf oil leases take a 35 percent dip

Oil leases downturn

NEW ORLEANS, La. (WVUE) - This week a sale of oil drilling leases in the Gulf of Mexico saw 35 a percent decline over the previous lease sale. An energy advocacy group says it shows a number of problems, but a Tulane oil expert says there’s no need to panic.

It is often a crystal ball into the future of the Louisiana oil industry.

According to Mid-Continent Oil and Gas, this week’s sale of Gulf of Mexico drilling leases brought in $159 million. That’s 35 percent less revenue than a lease sale held back in March.

“Nobody likes uncertainty, and when you have it, there are modest results in terms of gulf lease production,” said Eric Smith with the Tulane Energy Institute.

Smith says the industry is concerned about future prices. And he says there are some areas outside of the Gulf of Mexico that are seeing rapid drilling expansion.

"Guyana is going flat out with Exxon in the lead. They've gotten 14 discoveries in the last two years or so," said Smith.

Mid-Continent Oil and Gas issued a statement saying, "In order to ensure a sustainable path for energy industry for Louisiana, we urge the department of interior to once again take into serious consideration the opportunities for royalty reform in the deepwater Gulf of Mexico.’

"Reduced royalties leaves more money for the companies to do leasing," said smith.

But in spite of the declining bid activity, Smith says there’s no need to panic.

“Louisiana is really in pretty good shape. The issues facing Louisiana in the near term involve refining and pipeline work rather than worry about the leasing in the Gulf of Mexico,” said Smith.

Smith says Louisiana refineries are seeing little benefit from the increase in domestic oil production. He says most of them are built to process heavier imported oil, which he says is a less stable supply. But so far he says most in-state refineries are staying busy.

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