The US oil industry breathed a collective sigh of almost palpable relief earlier this week when the federal Bureau of Ocean Energy Management, Regulation and Enforcement green-lighted the first deepwater drilling permit since two back-to-back moratoria hit the Gulf of Mexico last May.
Noble Energy and three partners were the lucky recipients of the BOEM's stamp of approval on a well at the independent E&P company's Santiago prospect, at Mississippi Canyon Block 519 in 6,500 feet of water. That is about 20 miles south of BP-operated Macondo, the well whose blowout last April 20 has complicated permitting for deepwater drilling ever since.
Although BOEM director Michael Bromwich has promised more permits are likely in the weeks and months ahead now that the milestone of getting the first one out the door has been achieved, one thing to watch for is the timing of permit Number Two. While we know it's coming at some point, a relatively quick follow-up to the Noble nod may give industry that much more confidence the BOEM means business and is trying its darndest to return deepwater drilling to some form of normalcy.
UBS analyst Angie Sedita said in a report a day after the Noble permit was granted February 28 that her sources indicate "the next catalyst to watch is an exploration permit filed by Cobalt," a small and relatively new Gulf operator formed by ex-BP and Unocal managers, which last week had a revised exploratory plan approved by BOEM. Also, Shell has filed an exploration drilling plan that the agency must approve within 30 days, she noted.
Sedita pointed out that once approved, a drilling plan is then submitted as a drilling permit and must then meet BOEM's requirement that operators list oil spill containment measures on the permit they will use in case maximum oil volumes were to leak from a damaged well.
Meanwhile, what largely went unremarked in the hubbub surrounding what's widely been called the "first deepwater permit since Macondo" is that BP owns the lion's share of Santiago with 46.5%. Operator Noble has 23.25%, and two smaller companies hold the rest.
Actually, it's not technically not true that the Noble permit is the "first" since Macondo, since ExxonMobil received a deepwater permit last April 27 -- a week after the April 20 Macondo blowout. That permit was for an appraisal well at the Hadrian discovery, but the major was unable to dril it because of the deepwater moratorum.
But Noble's permit is the first for deepwater issued post-Macondo that complies with stricter new federal regulations, including the spill-containment mandate, that were imposed to make US offshore drilling safer.
For awhile after Macondo there was some question if BP would ever be allowed to drill in the Gulf again. But despite having operated the block that triggered the worst marine oil spill in US history, BP has some real offshore distinctions. It operates two of the largest oil developments in the US Gulf -- Thunderhorse and Atlantis. It has the distinction of operating the deepest well ever drilled, not only in the US Gulf but the world -- the Tiber discovery at 35,050 feet total depth and 4,100 feet of water in 2009. It also operates several other prominent Gulf developments, such as Mad Dog and Holstein.
So it's not only Noble that gets the distinction of holding the first post-Macondo spill-requirement-containing permit. The document also puts BP back in the US deepwater drilling business as well.
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