Why Trump's first offshore drilling lease sale didn't wow the oil industry
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Illustration: Shoshana Gordon/Axios
The second Trump era's first offshore oil and gas lease sale showed real but hardly gangbusters interest from the industry — and there's no simple explanation why.
Why it matters: The White House wants to juice domestic output, and the sale offered tracts at lower royalty rates enabled by the GOP budget law.
- More offshore leasing sets the stage for new production long-term, though deepwater projects take many years.
Catch up quick: The Interior Department's auction of tracts in the Gulf of America (renamed from Gulf of Mexico) drew $279.4 million in high bids.
- That's over $100M less than the prior sale back in late 2023 under President Biden, despite more favorable terms.
- And it's nowhere near the multibillion-dollar auctions in the mid-2000s, among other more aggressive sales over the years.
The big picture: So what explains Wednesday's bid totals?
- Oil companies weigh lots of things when deciding whether and how much to bid — predictions of long-term prices and demand, the regulatory landscape, competing opportunities and more.
- But a top Interior official flagged something else at play: a packed schedule of Gulf auctions under the budget law, which mandates 30 sales by 2040. It's a stark contrast from the pace of Biden-era auctions and plans.
"When you're setting that level of certainty ... they are not pressed to have to come in all at once," Laura Robbins, the acting regional head for Interior's Bureau of Ocean Energy Management.
- "We feel like this was a very successful sale," she told reporters at a briefing.
What they're saying: Oil analyst Clay Seigle said this view is justified — but not the whole story of the rather modest sale.
- "At the end of the day, soft price decks and formidable shareholder return requirements mean drillers need to be judicious with their [capital expenditure] programs across global portfolios," Seigle, who's with the Center for Strategic and International Studies, said via email.
The intrigue: BP was the most aggressive player, with nearly $61 million in high bids, signaling its pivot back toward its core fossil fuel business.
What we're watching: The next Gulf sales on what's slated to be a routine schedule.
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