Daily Archives: August 29, 2011

Push for permits in Gulf of Mexico

By Sheila McNulty in Houston

Sixty per cent of rigs contracted in the Gulf of Mexico are not working almost a year and a half after the Macondo disaster.

Industry participants are meeting on Tuesday with regulators to speed up permitting in the world’s most productive deepwater and oldest shallow-water basin, which was temporarily halted after the April 2010 rig explosion but has been slowly ramping up.

“We have the will to drill,’’ said Jim Noe, executive director of the Shallow Water Energy Coalition of companies drilling in the gulf’s shallow waters. “We just don’t have the permits to drill.”

Of 115 rigs in the gulf, 51 have no contracts, said Cinnamon Odell, senior rig market reporter at ODS-Petrodata, which provides data on the energy sector.

Of the 64 with contracts, she said, only 48, or 41.5 per cent of the fleet, are working.

That is down from the 74 contracted rigs in March 2010 – the month before Macondo. Sixty-five of those rigs – or 56.4 per cent – were working at that time.

Companies have complained that slow and unpredictable permitting costs them millions of dollars and has led some to pull rigs from the gulf.

Analysts said BP has for months been paying $2.4m per day for five rigs on standby.

BP Macondo oil well

BP has had a difficult time getting access to permits

The UK company has had a particularly difficult time getting access since it was in charge of the Macondo well that exploded.

In reporting its second-quarter results, BP said it had one rig back at work but added: “In the third quarter, we expect costs to continue to be impacted by rig standby costs.”

Bill Townsley, Royal Dutch Shell’s deepwater programme delivery manager, said it had seven rigs running, up from five when Macondo hit.

But the issue is having permits to drill new wells when a job ends, which is every two to five months.

“Right now, we’re receiving permits just in time,” Mr Townsley said. “We are working to get permits ahead of time. The Gulf of Mexico is one of our major heartlands.”

Shell would like to have 11 rigs in the gulf in 2013.

Analysts said at least nine rigs have left the gulf since the accident – six this year with two leaving this month.

“Once they leave, they typically leave on a long-term contract,” said Jim Dillavou, of Deloitte, the consultancy. He noted that several rigs destined for the gulf are going elsewhere.

Melissa Schwartz, spokeswoman for the Bureau of Ocean Energy Management, Regulation and Enforcement, said: “Personnel are working overtime to process pending permits.”

Since the moratorium ended, she said, regulators had approved 68 new shallow water permits, 112 permits for 34 unique deepwater wells requiring sub-sea containment and 45 permits for additional activities, including water injection.

“There are more rigs on contract today than there was a year ago,” she added.

But Mr Noe, also senior vice-president of Hercules Offshore, the gulf’s largest shallow water drilling company, said there was a moratorium on drilling in the deepwater gulf a year ago, so the comparison was meaningless.

“We have 18 of our 25 rigs working today but that may not last long,” he said. “We have 10 or 11 committed jobs for the rigs but we don’t have permits for the work yet. Without the permits, these wells won’t be drilled.”

Original Article

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