An empirical analysis of the determinants of high bonus bids for petroleum leases in the U.S. Outer Continental Shelf (OCS)

Abstract

This paper shows that neither aggregate measures used to analyze concentrated market and industry structures, nor patterns of joint bidding among firms active in the offshore Gulf of Mexico suggest either a decrease or a deficiency in the competitiveness of the lease sales held by the US Minerals Management Service. Our empirical results show that the relative change in the mean value of high bonus bids for leases with multiple bids (competitive leases) is greater than the change in the mean value of single-bid leases. Further, the mean value of high bonus bids for deepwater leases is also found to be significantly higher than that of shallow water leases. The results also suggest that variation in crude petroleum price index may lead to a higher mean value of the high bids, certeris paribus.