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Stepping up in the Gulf of Mexico

May 3, 2004, 15:00 CEST

Since Hydro established an office in Houston, Texas in 2002, the company has gradually built up a portfolio of assets and activities. Hydro now holds a 30 percent interest in the Lorien discovery, having recently purchased an additional 20 percent interest. In March 2004, Hydro was the high bidder on seven out of eight bids in Lease Sale 190 in the deep waters of the Gulf of Mexico.

In April, Hydro acquired an additional interest from ConocoPhillips in the Green Canyon Block 199 (Lorien) discovery, increasing Hydro’s interest from 10 percent to 30 percent.

This asset acquisition is in line with Hydro’s expressed upstream strategy of acquiring proven undeveloped hydrocarbon resources in existing focus areas, where Hydro may add value by contributing its competence.

An integrated project team is working on plans for an appraisal of the Lorien discovery during 2004. Announced as a discovery in July 2003, the Lorien well is located in 2,177 feet of water. The well was drilled to a total measured depth of 18,703 feet (or a total vertical depth of 17,432 feet) and encountered more than 120 feet of apparent oil in a high-quality reservoir.

Successful bidder

On March 17 2004, Hydro was the higher bidder on seven out of eight blocks in Lease Sale 190. The blocks are located near Hydro's existing leaseholds; five are in the northern Green Canyon area and the other two are in north central Walker Ridge, an area where recent drilling has identified significant potential.  Assuming The Minerals Management Service (MMS) approval of these bids, Hydro will have an inventory of 70 deepwater blocks, of which the company operates 21.

A total of 4324 blocks were offered in Lease Sale 190, which drew 83 companies submitting a total of 829 bids on 557 blocks (340 were in shallow water). The MMS have estimated that there is an additional 56 billion barrels of oil equivalents (boe) still to be found in the Gulf of Mexico region.
 
A Gulf of Mexico lease sale consists of companies submitting individual or group bids for any of the open blocks. These are sealed cash bids that are opened and read out on the day of the sale. The lease term is for 10 years and contains no drilling or work obligations. Furthermore, individual bidders can reduce exposure to drilling costs by farming out equity to partners, who typically pay a promoted share of well cost.