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  6.  | $8M from Combined State Slope, Inlet Lease Sales

$8M from Combined State Slope, Inlet Lease Sales

Dec 19, 2023 | Government, News, Oil & Gas

North Slope areawide map shows winning bids by Oil Search (Alaska) in olive, FINNEX in orange, Great Bear Petroleum Ventures in violet, Arctic Circle Exploration in teal, Lagniappe Alaska in magenta, and one amber tract for Strong Energy Resources in the lower left of the map.

Alaska Department of Natural Resources

A combined area-wide lease sale for the North Slope and Cook Inlet brought an estimated $8 million in “cash bonus” to the State of Alaska, an increase over last year’s annual sales.

Competition on Two Tracts

The Alaska Department of Natural Resources (DNR) received more than 110 bids on tracts covering more than 224,000 acres across the Beaufort Sea, North Slope, and Cook Inlet. Tracts were also offered in the North Slope Foothills and Alaska Peninsula, but no bids were received for those areas.

The North Slope lease sale received ninety-two winning bids on tracts covering 173,000 acres. Fully half came from Great Bear Petroleum Ventures; the other half was split largely by Arctic Circle Exploration, Lagniappe Alaska, and Oil Search (Alaska). In two instances, Santos subsidiary Oil Search (Alaska) was outbid by Thyssen Petroleum subsidiary FINNEX, its only two acquisitions of the sale. The leases are on either side of the Quokka Unit, where both companies hold a working interest; FINNEX and Oil Search (Alaska) bid against each other last year, too.

One other North Slope lease was won by Texas-based Strong Energy Resources, bidding on an inland tract along the Colville River near 88 Energy’s Umiat Unit.

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The Beaufort Sea region had a dozen winning bids on offshore tracts covering 36,000 acres. Savant Alaska, Lagniappe Alaska, and EE Partners were the only bidders. For one tract nearest Savant’s Badami Unit, Lagniappe outbid Savant by offering $65.08 per acre compared to Savant’s $26.13. The interest of Texas-based EE Partners is squarely on waters near West Harrison Bay.

DNR Commissioner John Boyle says the new leases are “consistent with major programs and exploration plans that are being pursued by multiple companies.”

The North Slope cash bonus of $6,169,735 combined with the Beaufort Sea cash bonus of $1,302,791 both exceeded 2022 results, which was among the top ten highest (in terms of average dollars per acre) since areawide lease sales began in 1998.

“I’m encouraged by the results of the annual State of Alaska oil and gas lease sale. These investments on the North Slope show that Alaska has a bright future ahead, with major economic and job opportunities for Alaskans as we to continue provide energy security for the nation,” says Governor Mike Dunleavy.

Royalty-Free Incentive

In Cook Inlet, DNR offered new terms to incentivize development. The cash bonus is fixed at $40 per acre, and a net profit share—where the state receives a portion of profits once a development becomes profitable—is the bid variable. The net profit share also enables a producer to recover costs more quickly and then share profits with the State once the development costs are recouped. Further, no royalties are set.

Despite the incentives, the 14,998 acres sold was less than last year’s Cook Inlet lease sales. The total cash bonus of $599,935 was higher than 2022 and the five-year average of $313,316. Hilcorp Alaska and Hex each submitted three winning bids, a similar number as in recent sales.

Beaufort Sea lease area, detailed in the bottom inset map, shows winning bids by EE Partners Corporation in teal, Lagniappe Alaska in orange, and Savant Alaska in violet.

Alaska Department of Natural Resources

“The lack of large new bidders or positions emphasizes the need for Alaska to take action to stimulate more natural gas production in the Inlet,” says Dunleavy. “I’ll be introducing a statutory proposal in the upcoming legislative session to do exactly this, to ensure we are doing everything we can to make our natural resources available for affordable, secure energy.”

The governor was gratified to see Hilcorp Alaska and Hex pick up new Cook Inlet leases.

Boyle adds, “Taking an innovative approach with these new Cook Inlet lease terms is one of the levers that DNR can pull to help make oil and gas production more attractive, so we hope it will gather increasing interest as producers have more time to evaluate this opportunity. We will continue to pull every lever we can.”

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In their company kitchens, the Corporate 100 blend wholesome ingredients with exquisite utensils to create the scrumptious ambrosia that keeps employees gratified and contented. Meet the top Alaska employers ranked by number of Alaskans on their payroll, and learn the recipe for success. This issue also includes a focus on economic development initiatives in Anchorage and Kodiak.

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