The nation's major oil companies said in effect today they think there is little chance of finding oil or gas off the East Coast, an area the government and the industry had hoped would provide a fresh supply of petroleum to replace dwindling reserves in the Southwest.
Oil companies, dispappointed by their lack of success so far off the East Coast, bid on only 44 of the 109 tracts the federal government auctioned today, paying $41.7 million for the ritht to explore for the oil.
In August 1976, the first time the government auctioned drilling rights off the East Coast, oil companies paid a whopping $1.1 billion for 93 of the 154 tracts offered.
The results have been discouraging. Of the 10 expensive holes drilled so far, nine have come up dry, and one owned by Texaco Inc. offered a moderate amount of natural gas.
Many of the major oil companies that bought drilling leases in the 1976 sale did not even bother to bid today, including Gulf, Mobil and Standard Oil of California.
A Mobil spokesman -- who noted that the company is still drilling, so far unsuccessfully, in tracts it acquired in 1976 -- said "we just didn't see sufficient merit in the tracts offered" to make a bid.
A spokesman for Exxon Corp., which spent $8.1 million for mine tracts, said that one reason "enthusiasm may have been reduced" in today's sale is the "drilling results so far."
Today's performance "pretty much shows that the oil industry has lost interest in the Baltimore Canyon area," according to Philip Dodge, an oil analyst for Merrill Lynch, Pierce, Fenner and Smith.
The Baltimore Canyon is the name given the subsea geological formation in which companies are drilling. The Baltimore Canyon stretches along a large portion of the East Coast.
The areas offeed today ranged from Virginia to New York, in roughly the same region covered in the 1976 lease sale. Some of the tracts auctioned today were ones not bid on in 1976. Other tracts were farther north, farther south and farther out to sea than those sold in 1976.
In all, 74 bids were tendered. The Inteior Department's Bureau of Land Management tentatively expected the 44 highest. Companies chose not to bid at all on 65 of the 109 tracts ut up for sale.
The extent of oil company disinterest in the sale because of the problems with current drilling was not totally apparent to the government.
"We expected it would be a smaller sale, and it turned out to be a smaller sale," Frnak Basile, director of the Interior's New York Outer Continental Shelf Office, said after the auction, held in the Felt Forum of Madison Square Garden.
But it was smaller than even Basile expected. Tuesday he told reporters that some tracts would have only one bid but that others might have nine or 10. He said he anticipated the auction would be over by noon.
As it turned out, only 20 tracts had more than one bid, with four bids the highest for any individual tract. The auction was over by 10:30 a.m.
Oil companies, or in some cases a consortium of oil companies, had to have their sealed bids in by 9:30 a.m. The bids were opened and the highest bidder for each tract was tentatively awarded a five year lease to explore for and produce oil or natural gas.
If a comapny finds and produces oil and gas on a particular tract, then the lease is extended indefinitely. The government gets royalties for each barrel of oil and each thousand cubic feet of natural gas produced for sale.
Oil companies have not given up hope that the Baltimore Canyon will yield huge finds of natural gas and oil. But analysts note that nearly all offshore drilling in the United States -- with the exception of the Gulf of Mexico off Texas and Louisiana -- has met with little success.
The so-called Destin Anticline off the Florida coase, which geologically looks as if it has the potential to give large quantities of oil and gas, has been a bust so far.
Similarly, oil companies have had almost no success off the coast of Alaska, California and the Pacific Northwest.
While exploring for oil is expensive -- it costs at least $3 million and usualy more to drill just one offshore well, and the cost rises sharply as the water deepens -- payoffs are huge when oil is discovered.
That is why oil companies -- big and little -- were willing to shell out more than a billion in 1976 to try geologically promising Baltimore Canyon, even though not a drop of oil or hints of natural gas had been found.
Oil companies must be convinced there is "little chance they'll find commercially produceable" deposits, said one analyst "or they'd have been out there in force."
Indeed, there was so little competition that Exxon Corp. Got two leases for $154,000 each, a throwaway sum in the big oil game.
By contrast, in 1976, one tract went for $107.8 million, more than twice the total tendered for all 44 tracts awarded today.