FUTURE LEASE ACTIVITY
Since the deepwater arena is already heavily leased, the number of leases that are relinquished or expire
will influence activity in future lease sales.
Given the fact that most companies can only drill a small
percentage of their active leases, it is likely that many high-quality leases will expire without being tested.
The impending turnover of these leases often results in �farm-outs� to nonmajors, opportunities for
different companies to gain a lease position and, potentially, a more rapid exploration and development of
Ultimately, an untested and undeveloped lease will expire and possibly be leased again.
Figure 28 shows leases that will expire in the coming years, assuming each lease expires at the end of its
primary lease term (without a lease-term extension).
Figure 28. Anticipated lease expirations in the Gulf of Mexico.
Note that lease terms vary according to water depth.
Primary lease terms are five years for blocks in less than 400 m (1,312 ft), eight years for blocks in
400-799 m (1,312-2,622 ft), and ten years for blocks in 800 m (2,625 ft) or greater.
Therefore, in the
absence of primary lease-term extensions, all active shallow-water leases will expire before 2010
(explaining the absence of expiring shallow-water leases in certain frames of figure 28).
The 2003 and
2004 lease sales will offer a limited number of expired deepwater leases because of moderate leasing
activity in 1993 and 1994.
The availability of previously leased blocks is expected to increase
dramatically in 2006 as a result of the leasing boom that began in 1996 and continued through 1998.
lease expiration projections will pressure leaseholders to drill and evaluate their holdings and will provide
opportunities for other companies to enter an active play by acquiring leases as they expire or by
obtaining �farm-outs� from companies with untested acreage.
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