Announcement of Invitation for Bids on Oil from Federal Properties in the Gulf of Mexico

AGENCY:

Minerals Management Service (MMS), Interior.

ACTION:

Notice of Solicitation on Federal Royalty Oil.

SUMMARY:

MMS is announcing a public competitive offering of approximately 35,000 barrels per day of crude oil to be taken as royalty in kind from Federal properties in the Gulf of Mexico. This solicitation may be found on the MMS Internet website at http://www.rmp.mms.gov.

DATES:

See SUPPLEMENTARY INFORMATION section below.

ADDRESSES:

See FOR FURTHER INFORMATION CONTACT section below.

FOR FURTHER INFORMATION CONTACT:

Mr. Todd Leneau, Minerals Management Service, Procurement Branch, MS 2730, P.O. Box 25165, Denver Federal Center, Denver, CO 80225-0165; telephone number (303) 275-7385; fax (303) 275-7303; e-mail Todd.Leneau@mms.gov.

SUPPLEMENTARY INFORMATION:

This Solicitation Number 1435-02-00-RP-40337 offers approximately 35,000 barrels of crude oil per day from selected Federal properties in the Gulf of Mexico. This solicitation was posted to the MMS Internet website on August 22, 2000, and may be found at http://www.rmp.mms.gov under the question “What else is new?” The solicitation may also be obtained by contacting Mr. Todd Leneau at the address in the FOR FURTHER INFORMATION CONTACT section above.

Bids should be submitted to the address provided in the solicitation. Bids will be due at that address on or before September 18, 2000. MMS will notify successful bidders and operators of production selected for royalty in kind on or before September 30, 2000. The royalty oil contracts will be effective November 1, 2000, and will have a 6-month term with a 6-month contract extension by mutual consent of both the winning bidder and MMS.

The Federal Government will begin taking the awarded royalty oil volumes for delivery to successful bidders beginning on November 1, 2000. Under the terms of this solicitation, operators will deliver the royalty oil to market centers such as St. James and Empire, Louisiana, where winning bidders will take delivery. Winning bidders will report deliveries to MMS using a Microsoft Excel spreadsheet. Pricing will be established in the contract.

MMS is allowing bidders to self-certify their financial solvency instead of posting a letter of credit. Details are available in the solicitation.

Royalty oil will be sold based on a competitive bidding process. The bid proposal will be based on formulas representing differentials from index prices. The highest bidder, exceeding or meeting minimum bid, will be notified by phone or e-mail and provided a list of properties from which to choose. After the highest bidder selects his/her properties, the list of remaining properties will be provided to the next highest bidder. This process will be continued until all the oil is selected or the minimum bid threshold is met.

As stated previously, this sale will be a competitive bidding process, whereby a minimum bid, for each oil type, based on differentials from index prices will be established. If the minimum bid price is not met, MMS will have the option to negotiate prices with the highest bidder.

This offering of crude oil continues the MMS's royalty-in-kind pilot program. MMS's objective is to identify circumstances in which taking oil and gas royalties as a share of production is a viable alternative to the usual practice of collecting oil and gas royalties as a share of the value received by the lessee from the sale of production.