Oil leasing activity high, but drilling has yet to follow

Oil companies continue to lease Nevada properties, but the strong leasing activity that began nearly a year ago has yet to translate into much actual exploration.

The Bureau of Land Management said its quarterly auction of oil-and-gas leases in the state this month drew $2.5 million in bonus bids.

Oil companies bought leases on 136 parcels representing 302,449 acres, and the highest bid was $70 per acre.

"It was a very good sale," said Steve Salzman, assistant deputy state director of minerals for BLM.

He noted that the auction of oil leases in the past typically drew offers on about 10 percent of the parcels that were offered. Since the middle of last year, however, the auctions have drawn bids on 25 percent or more of the Nevada parcels that BLM puts up for bid.

Driving the increase, Salzman said, have been higher oil prices and fears that world turmoil could drive prices even higher.

Nevada has drawn interest after a major oil discovery in Utah in 2005 spurred some thinking that similar geology might be found deep under the Silver State.

But Alan Coyner, administrator of the state's division of minerals, said drilling activity hasn't turned up. In 2005, the state recorded the start of drilling on seven oil wells compared with four in 2004. So far this year, operators have reported the start of the only exploration well in the state.

It's likely, Coyner said, that the companies bidding at recent BLM auctions now need some time to raise money from investors to pursue drilling programs.

Given the state's limited history as an oil producer, investors may need some convincing to finance drilling programs.

Some of the leasing activity, Coyner said, may represent programs by speculators to assemble blocks of leases that they hope to flip to companies that will undertake the actual exploration.

"It's sort of like real estate," he said.

In the last quarterly auction by BLM, $1.2 million in bonus bids were received on 307,107 acres in December.