Published: Thursday, February 03, 2011 at Nola.com
While a backlog of drilling permits in Washington continues to feed oil industry angst, new data shows that more rigs are in the Gulf of Mexico than before the BP oil spill, indicating that operators might have more confidence in the future than they are letting on.

Times-Picayune archiveWhile only 34 of the 125 rigs in the Gulf are actually working — half the total that were active before the Macondo well blowout — the vast majority of the idle rigs, particularly those slated for big-ticket jobs in deepwater, will remain under contract for the rest of 2011.
The latest tracking information from ODS-Petrodata, a Houston-based compiler of oil and gas data, shows there are 10 more rigs in the Gulf now than there were last April.

While only 34 of the 125 rigs in the Gulf are actually working — half the total that were active before the Macondo well blowout — the vast majority of the idle rigs, particularly those slated for big-ticket jobs in deepwater, will remain under contract for the rest of 2011.

In the shallow-water Gulf oil fields, where the government has never officially banned drilling but has issued few work permits in the past several months, activity has rebounded to near its pre-blowout levels.

There are 26 shallow-water rigs operating now, just 11 fewer than before the BP blowout, according to ODS-Petrodata. In December, the government issued seven shallow-water drilling permits, matching the monthly average from the year leading up to the BP disaster.

There are also signs of renewal in the more lucrative deepwater fields.

Plan under review

Last week, the Interior Department’s Bureau of Ocean Energy Management, Regulation and Enforcement announced it was reviewing the first new exploratory drilling plan for a deepwater well since the official drilling ban was lifted Oct. 12. The plan by Shell to drill three wells 137 miles south of the Vermilion Parish coast could serve as a template for how other post-Macondo environmental assessments can progress.

View full sizeStill, industry observers remain concerned about the rate of approval for the drilling plans submitted since the end of the moratorium.

“If we don’t see a permitting process that moves forward with reasonable speed, these rigs will remain idle and eventually leave,” said Michael Hecht, president of Greater New Orleans Inc.

There are 95 exploration plans in the BOEMRE pipeline. Some require additional information from the applicants and agency Director Michael Bromwich has acknowledged that he needs more engineers to review the paperwork. President Barack Obama asked Congress for $100 million to beef up the agency, but so far has received only $23 million.

Bromwich said Thursday that his agency is trying to strike a balance between “regulatory certainty” and new safety reforms, promising that “the processing of drilling permit applications and proposed drilling plans will not be delayed while these additional reforms are developed.”

Tom Marsh, U.S. publisher of ODS-Petrodata, predicts a return to pre-spill activity in the Gulf, even if the new safety regime will require more patience than operators are used to.

“Eventually the government will get it together and the companies will get it together and stuff will start flowing in one end and out the other end,” Marsh said. “Just because it takes longer to do doesn’t mean there will be fewer rigs drilling. These companies have a lot of money invested in these leases.

“And another indicator that they will not just bail out of here: Several of the companies have bonded together to form the new spill-response groups. Clearly they’re not going to make that effort if they intend to leave.”

A net gain

In fact, while Sen. Mary Landrieu, D-La., and others have focused on the five semi-submersible drilling rigs and two drillships that left the Gulf after the moratorium was imposed, few have noted that 19 rigs have come into the region during that same time period. Some just passed through and left again, like one that stopped in a shipyard on its way to Brazil. But there’s still a net gain to the Gulf, according to the ODS-Petrodata figures.

There are 62 rigs under contract in the Gulf, with 20 of those contracts expiring by June 1, the start of 2011 hurricane season. All but two of those are jackup rigs that operate exclusively in shallow water. Marsh said that most of the contracts for the floating rigs and drillships that explore in deepwater zones don’t expire until 2012.

The key to their future may rest on how Shell’s plan for its Auger Field survives BOEMRE’s environmental assessment. The government has always had a 30-day review period for new drilling plans, including a 10-day public comment period, but it has never called much attention to it before now.

The agency put out a press release Jan. 28 inviting comments on Shell’s Auger plan at its website, www.boemre.gov/PublicComment.htm. After the Minerals Management Service was roundly blasted for issuing categorical exceptions for nearly all of the environmental assessments required by law before the BP blowout, BOEMRE, its successor agency, promised a case-by-case review for every plan moving forward.

Bromwich publicly touted the 30-day review of Shell’s plan as an example of the government’s new dedication to environmental protection. The environmental assessments would no longer be cookie-cutter documents, he said, like the ones that lifted language about walruses in Arctic drilling zones and included them in assessments of the subtropical Gulf environment.

Creating a template

But Bromwich told Lee Hunt, president of the International Association of Drilling Contractors, that the results of the Shell review and others soon to follow would create a “template” for subsequent assessments, helping move the process along.

“There are baseline analyses that will be completed for the first few plans that we anticipate will be useful and applicable in subsequent (environmental assessments). But every EA will be developed using the specifics of the plan area,” said Melissa Schwartz, a BOEMRE spokeswoman.

Hunt, however, said he remains skeptical about whether drilling can really recover before the end of the year.

“It’s one of those things they are dangling out there and calling it ‘hope,’ ” Hunt said. “We’re 30 days from the first new deepwater well, and they contend it will go faster after that. Everyone’s hoping it will.”

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David Hammer can be reached at [email protected] or 504.826.3322.