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Offshore Auction Yields Huge Total in Bids; Geopolitics Halts Oil Production

Analysis by Energy Workforce President Tim Tarpley

Energy Workforce President Tim Tarpley

Over the holiday weekend the U.S. Navy sank three small Houthi attack boats, killing their crews in the Red Sea. The incident began when U.S. forces responded to a distress call sent from a Maersk container ship, the Singapore-flagged Hangzhou, which had come under attack from the Houthi ships. Upon arriving on the scene, U.S. helicopters were fired upon from the boats and responded by quickly destroying three of the Houthi vessels, with one fleeing and escaping the scene.

In response to the incident, the Houthis blamed the U.S. for the attack and said they would not stop operations in the Red Sea. National Security Council spokesperson John Kirby stated on the Sunday morning talk shows that the U.S. does not seek to escalate the conflict with the Houthis but will continue to challenge any aggressive attacks that they make. Kirby also stated that a pre-emptive attack on Houthi capabilities within Yemen has not been ruled out. In the meantime, some international shippers are choosing to limit shipments through the region with some choosing to avoid the area altogether.

On Monday, in response to the escalating crisis, Iran — which is the major backer of the Houthis — sent one of its flagship battleships into the Red Sea, according to the Iranian news agency. This move could further escalate the situation should the U.S. decide to take direct action against the Houthi naval infrastructure within Yemen. Early this week, Brent crude rose around two dollars on the news of the attack but later retreated due to continued concerns surrounding interest rates and the potential for a cooling economy.

December 20 Offshore Auction Yields Huge Total in Bids

Also of note over the holiday break, the Interior Department held an auction for 311 tracts in the Gulf of Mexico totaling over 1.7 million acres. This sale was mandated by the Inflation Reduction Act and will likely be the last sale until 2025.

The Biden Administration has been slow-walking additional offshore lease sales, often using the argument that there may not be sufficient interest from the industry to justify a sale. Quite to the contrary, a total of 26 companies participated in the bidding, with Hess, Occidental, Shell, Chevron and Woodside Energy making up the top five bids. The sale drew a total of $382 million in high bids, the largest total in over eight years.

This large bid total is important in that it opens the way for further growth in the Gulf, and puts some pressure on this Administration to stop slow-walking additional sales. This could be especially important should the Administration flip in the 2024 elections, as we can expect increased calls for additional sales beyond the limited number that the Biden Administration has scheduled.

Tim Tarpley, Energy Workforce President, analyzes federal policy for the Energy Workforce & Technology Council. Click here to subscribe to the Energy Workforce newsletter, which highlights sector-specific issues, best practices, activities and more.



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