An apparent uptick in approved permits in the deepwater Gulf of Mexico (GOM) has boosted investor enthusiasm about the near-term prospects for offshore activity but the backlog of permits issued but not yet drilled paints a different picture, according to an analysis by FBR Capital Markets.

FBR’s Robert MacKenzie and Benjamin Salisbury used a proprietary rig count scenario analysis tool to determine the number of rigs that could be supported at various paces of permitting, as well as the ratios of permit backlog-to-rig count.

Between 2006 and 2010, before the Macondo well blowout, they noted that there typically were three times the number of permits in backlog at the former Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) than there were deepwater rigs working in the GOM.

“Using the September 2011 pace of five new well permits per month, the best case scenario would be a working rig count of just 12 rigs, less than the 28 marketed rigs in the Gulf,” noted the duo. However, that rate “assumes sustainable just-in-time permitting, which, in our opinion, is unlikely.”

Using the historical 3:1 ratio between the backlog for permit applications and the rig count, the analysts determined that “a pace of 29 permits per month would be needed to support 28 rigs by the end of the year.”

The pace of deepwater permitting has been fluctuating since the moratorium, which makes that scenario unlikely, said the analysts. Two types of deepwater permits, they said, are being issued: “labor-intensive” and “total incremental.”

“Labor-intensive” permits basically are in the permitting process that has been revised since the moratorium, which require operators to submit more data for, among other things, subsea containment, said MacKenzie and Salisbury. Many permits already in the works to drill in the deepwater GOM prior to the deepwater drilling moratorium had to be pulled and resubmitted by operators to comply with the new requirements.

“Total incremental permits” are for first-time, post-moratorium new wells, sidetracks, bypasses and revisions, including injection wells and platforms.

A “simple query” last month on the BOEMRE website found that 25 deepwater drilling permits were issued in September, noted the duo. However, most of those permits were for revisions to existing permits that required fewer man-hours to complete and generated “little or no incremental backlog for operators.”

Federal regulators are promising that the permitting process will get better, said the FBR team. The newly reorganized BOEMRE went live on Oct. 1, dividing duties between two independent bureaus: the Bureau of Safety and Environmental Enforcement (BSEE) and the Bureau of Ocean Energy Management (see NGI, Sept. 26).

Former BOEMRE Director Michael Bromwich, who is temporarily running the BSEE, said the agency would need “significantly more resources” to step up permitting and carry out enforcement activity. “Right now we’re on tenterhooks for what’s going to happen in 2012,” he said last month.

“We expect continued gradual improvement in permitting as the department and operators continue to learn to work within the new enhanced permitting regime,” said the FBR team. “But structural headwinds remain. Also, we still see structural headwinds including hiring and funding constraints, potential safety and permitting legislation, pending drilling safety regulation revisions, and ongoing environmental litigation.”

The analysts are taking the federal regulators “at their word that resource constraints will continue to govern the rate at which permits can be issued. As a result, we continue to expect continued slow recovery of the deepwater permitting rate.” However, “even granting a reasonable improvement in permitting, a rig count in the low 20s would be unsustainable.”

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