It’s not, in fact, animosity toward the oil and gas industry but rather limited staff and resources that are hindering federal officials’ abilities to fast-track deepwater drilling projects, Chevron Corp. CEO John Watson said last week.

Watson’s comments in support of the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEM) came during a forum in Washington, DC, sponsored by The Hill, which covers Capitol Hill; and the American Petroleum Institute (API). BOEM and Director Michael Bromwich have been accused by some lawmakers and industry officials of intentionally delaying offshore drilling because of last year’s Macondo well blowout in the Gulf of Mexico (GOM).

“I don’t believe that Director Bromwich and his people are trying to slow-walk permits,” Watson said. “I think they are trying to do their job very well. Whether they have the resources to do it is another matter. Whether there’s political overtones elsewhere, that’s for others to judge.” BOEM is “working very hard to process the permit applications” but it lacks the staff to boost the approval process. More regulations were imposed on the industry following the GOM oil spill.

The API on Wednesday and others in recent months have voiced concerns that BOEM’s revised deepwater permit approval process, among other things, is hampering job creation (see related story). The BOEM instituted stricter regulations following the Macondo blowout, but last month the agency implemented several tools to help operators improve the quality of their submitted exploration and development plans and permit applications to expedite processing (see NGI, Sept. 5).

At the end of August BOEM said it had approved since mid-February 113 deepwater permits for 34 unique wells that require subsea containment. There were 17 permits pending and 22 permits returned to the operators with requests for additional information, particularly information regarding containment. Additionally, BOEM had approved 45 permits for activities including water injection wells and procedures using surface blowout preventers. Only one of these permits was pending and one permit has been returned to the operator for additional information.

According to a note on Friday by Tudor, Pickering, Holt & Co. (TPH) analysts, BOEM has approved 12 permits since the beginning of August, including 17 new exploratory, two new development, two sidetracks and one bypass.

“The bar has been raised,” said Watson. “One of the opportunities for the Obama administration is to make sure the BOEM is fully funded because…there is pressure on permitting.”

Congress awarded BOEM more funding in the 2011 budget deal that was forwarded to President Obama in April (see NGI, April 18). The first oil and gas lease sale in the GOM since the Macondo well blowout is scheduled to be held Dec. 14 in New Orleans (see NGI, Aug. 29).

Analysts last week appeared to agree with some of Watson’s comments.

“Our conversations suggest that, contrary to many investors’ expectations, the Department of Interior is issuing deepwater Gulf of Mexico permits with relatively few political barriers,” said analysts with FBR Capital Markets. “This reinforces our view, that rather than being political, the GOM permitting drag is more reflective of the increased work required to issue each permit and the limited bureaucratic resources available. As a result, we continue to expect continued slow recovery of the deepwater permitting rate. Moreover, our analysis shows that the moratorium eliminated the permitting backlog, which is historically three times the rig count. Thus, the permitting pace would need to be significantly increased to rebuild the backlog to maintain the current rig count, much less support 28 rigs.”

The TPH team thinks the deepwater permit approval process is “beginning to thaw,” while shallow water permitting is a “nuanced story,” with 20 approved since the beginning of August but only six new wells besides sidetracks and bypass wells. Shallow water permits, said the analysts, have averaged 224 a year, or around 19 a month.

The “bottleneck in the process appears to be less BOEM and more lack of operator submissions of applications to drill,” said the TPH analysts. “Both deepwater and shallow applications are running below approvals year to date…Operators seem to be working through the process of how to make a successful application [which is] needed for any activity increase.”

More rigs may leave the GOM because of the slowdown in permit approvals, said the FBR analysts.

“Our proprietary analysis of BOEM deepwater drilling permit approvals and other regulatory filings leave us convinced that the current deepwater GOM active rig count of 20 is unsustainable at the current pace of permit approvals. Furthermore, unless the pace of permit approvals increases, then we would expect between eight and 20 additional rigs to depart the deepwater GOM, in addition to the 12 that have already left or committed to leave. Eight assumes the pace of permitting picks up to support the current rig count, while 20 assumes today’s pace of permit approvals persists.”

Last week Chevron announced a new discovery at its Moccasin prospect in the deepwater GOM five months after it resumed drilling the well (see related story). And Watson said Chevron would continue to “make big bets in the Gulf of Mexico” because “we are excited about the opportunities in the Gulf…We’re also going to continue to drill exploration wells where we have opportunities.” The “key” to more discoveries like Moccasin, he said, “will be rapid permitting.”

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