The Interior Department agency overseeing the safety of offshore rigs Monday approved the first deepwater drilling perrmit since the explosion aboard the Deepwater Horizon rig and resulting oil spill last April. The permit allows Noble Energy to move forward with a bypass well in the Santiago prospect in Mississippi Canyon Block 519, about 70 miles southeast of Venice, LA. The Houston-based producer is the operator with a 23.25% working interest.

The permit approval by Interior's Bureau of Ocean Energy Management, Regulation and Enforcement (BOEM) comes two days before Interior Secretary Ken Salazar is scheduled to appear before the Senate Energy and Natural Resources Committee, where he likely will come under intense questioning about the department's slow pace in issuing drilling permits in the deepwater Gulf of Mexico. The political upheavals in the Middle East also bring into question the security of U.S. oil supplies.

After a new containment system was tested successfully in February, industry groups pressured the BOEM to reopen the Gulf (see Daily GPI, Feb. 18a). The pressure from the industry came during the same week that a federal district judge granted a preliminary injunction ordering the BOEM to act within 30 days on five pending permit applications to drill wells in the deepwater Gulf (see Daily GPI, Feb. 18b). Just last week the Louisiana congressional delegation led by Sen. Mary Landrieu (D-LA) called on President Obama to put an end to the de facto moratorium (see Daily GPI, Feb. 23).

In early January BOEM notified 13 producers whose deepwater drilling activities were suspended by the deepwater drilling moratorium that they may be able to resume previously approved activities without the need to submit revised exploration and development plans for supplemental review under the National Environmental Policy Act. Noble Energy was among the 13 (see Daily GPI, Jan. 4).

"This permit represents a significant milestone for us and for the offshore oil and gas industry, and is an important step towards safely developing deepwater energy supplies offshore," said BOEM Director Michael R. Bromwich.

Initial drilling on this well began April 16, 2010 in 6,500 feet of water, and the activities were suspended June 12, 2010, under the temporary drilling moratorium, issued in the wake of the Deepwater Horizon spill.

The Santiago exploration well had previously been drilled to a depth of 13,585 feet at the time of the moratorium. Drilling operations are anticipated to resume later this month targeting total drilling depth of approximately 19,000 feet. Results are expected by the end of May, Noble Energy said.

"Over the past several months, Noble Energy has worked with a number of operators and service providers to enhance the safety of deepwater drilling operations, including the implementation of third-party certification of well designs and BOP [blowout preventer] testing. Our partnership with others in the Helix Well Containment Group has increased the deepwater Gulf subsea control and containment capabilities. The industry has improved its ability to respond to surface spills as well. Our teams have done an outstanding job of coordinating with the [BOEM] on these matters," said Noble President David L. Stover.

While this is the first permit issued for deepwater drilling post-moratorium, BOEM noted it has issued 37 permits for new shallow water wells.

The American Petroleum Institute (API) was not impressed. Noting that only one well permit was approved, API said, "while every permit is welcome news, tightening the screws on domestic oil and natural gas production during a time of increased demand and global uncertainty is a formula for disaster."

API noted a recent study by Wood Mackenzie "shows that if the permit process is not speeded up, as much as 680,000 boe/d could be at risk in 2019 and associated job losses could reach 125,000 per year by 2015."

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