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First Permit OK'd for New Deepwater Gulf Exploration Since Ban Lifted

The Bureau of Ocean Energy Management, Regulation and Enforcement's (BOEM) permit-issuing process is gathering steam. The Interior Department approved a fifth permit -- this time for Chevron USA Inc. -- to resume drilling in the deepwater Gulf of Mexico (GOM). This is the first permit issued for completely new exploration since the federal moratorium was lifted last October.

This "permit approval further demonstrates industry's ability to meet and satisfy the enhanced safety requirements associated with deepwater drilling, including the capability to contain a deepwater loss of well control and blowout," said BOEM Direct Michael R. Bromwich. "We will continue to review and approve those applications that demonstrate the ability to operate safely in deepwater."

The revised permit will allow Chevron to drill a new well for its Well No. 1 in Keathley Canyon Block 736 in 6,750 feet of water, approximately 216 miles off the Louisiana coast. Initial drilling on Chevron's Well No.1 began in March 2010, and was halted three months later as a result of the explosion aboard the Deepwater Horizon rig and subsequent spill (see Daily GPI, April 22, 2010).

Chevron has contracted with Marine Well Containment Corp. to use its capping stack to stop the flow of oil should a blowout occur.

Earlier this week ExxonMobil Corp. was issued a permit to resume deepwater drilling in Keathley Canyon Block 919, approximately 240 miles off the Louisiana coastline south of Lafayette, LA (see Daily GPI, March 23). This was the first permit approved that designated the Marine Well Containment Corp.'s system as its containment solution, according to BOEM.

The BOEM also has approved permits for ATP Oil & Gas Corp., Noble Energy and BHP Billiton to resume drilling in the deepwater Gulf (see Daily GPI, March 1). The permits for these producers, as well as ExxonMobil, allow for the continuation of drilling that was interrupted by the moratorium. They do not permit new drilling.

The BOEM on Monday also approved the first new deepwater exploration plan -- for Shell Offshore Inc. -- since the Macondo well blowout and resulting oil spill (see Daily GPI, March 22). Approval of the exploration plan is the first step. Shell still must apply for drilling permits. To get those it will have to demonstrate that it could contain a deepwater well blowout. It also will have to pass an environmental assessment for the three exploratory wells it plans to drill in 2,950 feet of water in the Augur Field, about 130 miles off the Louisiana coast.

Permit approvals for drilling in the deepwater GOM are slowly on the rise. But drilling services companies told attendees at CERAWeek in Houston earlier this month that the shock waves from the U.S. government moratorium are likely to reverberate for many years to come, even after the permitting flowrate gets back up to speed.

Although not included in the moratorium, producers who drill in the shallow waters of the GOM have felt the impact. In an op-ed column in The Washington Post Thursday, Randy Stilley, president of Seahawk Drilling, said his company declared Chapter 11 bankruptcy last month and sold its assets to Hercules Offshore (see Daily GPI, Feb. 15) because "we found our customers unable to secure permits for work in the Gulf of Mexico despite the fact that both our industry and our company have excellent safety records."

Following the explosion aboard the Deepwater Horizon rig in the GOM, "it became clear that Seahawk's greatest rival was no longer our industry competitors but the U.S. government," Stilley wrote.

The federal government "has all but crippled the industry. The survivors (for now) like Hercules are staying afloat largely thanks to revenues from operations outside U.S. waters," he said. The BOEM has issued a mere 37 permits for new shallow-water wells since April -- an average of just three per month. Before April 2010, an average of 7.1 permits were approved each month during the year before the blowout and oil spill, he said.

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