US readies auction for Gulf of Mexico oil leases

The US has finished preparations for an auction next month of oil and gas leases in the Gulf of Mexico, giving producers their first chance since 2021 to buy drilling rights in the region.

The US Interior Department today released a final notice to hold Lease Sale 259 on 29 March. The agency will offer oil and gas leases on 73.3mn acres (300,000 km²), fulfilling a congressional mandate from last year's Inflation Reduction Act to hold an offshore lease sale by the end of next month.

Offshore producers have lobbied President Joe Biden's administration to resume regular leasing to provide more predictability to their ability to operate in the Gulf. The Inflation Reduction Act requires another offshore lease sale by 30 September, but additional lease sales cannot be held until the administration finalizes a new offshore leasing plan for 2023-28.

The Interior Department, in a offshore leasing plan proposed last summer, said it was considering resuming twice-a-year lease sales in the Gulf of Mexico. But the agency is also considering a "no lease sale" option that would halt further leasing until at least 2028.

Oil industry groups last month filed a lawsuit asking a federal court to set a 30 September deadline for the Biden administration to finish the five-year leasing plan. Industry officials are urging the administration to reject the no lease sale option.

"Halting new leasing on US federal lands or waters would hurt communities that depend on offshore production," American Petroleum Institute Frank Macchiarola senior vice president said at an industry event this week in Canada. "It would also likely cause volatility in global energy markets."

The US Gulf of Mexico produced 1.7mn b/d of crude last year, according to federal data. Offshore production could hit a record high of 1.9mn b/d this year, according to the US Energy Information Administration's latest Short-Term Energy Outlook.

By Chris Knight