Gulf moratorium is over but drilling has to wait

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Published: October 14,2010

Tags: BP, drilling, gulf, moratorium, oil spill

NEW ORLEANS – A day after the end of the federal moratorium on deepwater drilling, the Gulf oil industry was a mix of furious activity and tortured waiting around.

Companies that are helping the industry meet new regulations are scrambling to keep up with increased business while oil-rig workers must remain idle until the new requirements are met.

Industry officials fear that’s the way things will be for months to come.

The Obama administration lifted its moratorium on deepwater drilling six weeks earlier than expected. But a combination of bureaucratic and technological hurdles means it will be months before most of the two dozen rigs idled by the moratorium resume drilling.

“There’s a big difference between lifting the moratorium and getting back to work,” said Marvin Odum, president of Shell Oil, which is eager to get its six rigs drilling again in the Gulf.

One company that won’t yet divulge its plans for new deepwater drilling in the Gulf is BP PLC. The British oil company leased the rig that exploded on April 20, killing 11 people and leading to the largest offshore oil spill in U.S. history. Five weeks later, the government imposed the moratorium.

Analysts say the new rules could have a long-term effect on Gulf drilling activity. One analyst predicts they could lead to a 17 percent reduction in Gulf oil production by 2015.

Among the industry’s biggest concerns include how regulators will conduct environmental reviews of projects and how they will require companies to plan for worst-case oil spill scenarios. Officials also are braced for new rules that get written as more is learned about the rig explosion.

In the meantime, some companies that support the industry are racing to perform the extra work required to meet some of the new regulations enacted since June.

For example, one new rule requires that operators use a third part to certify equipment that prevents a well from blowing out. Such a device, called a blowout preventer, failed to stop the BP spill. Michael Montgomery, president of West Engineering Services, does this work and would love to help-when he can get to it.

“We are backed up,” he says. “We’re busy around here, and we’re staffing up as quickly as possible.”

Others are busy too. Part of the certification process, especially for older equipment, requires bringing the equipment back to shore, disassembling it, and putting it back together. During that process, replacement parts have to be ordered and installed, and then the whole mechanism needs to be tested.

Then the paperwork needs to be gathered, and government inspectors must inspect every rig.

Bureau of Ocean Energy Management director Michael Bromwich said Tuesday that he could see some new deepwater drilling permits being approved by the end of the year. But he wouldn’t say exactly when or how many permits he expects to issue.

He vowed the inspections would happen promptly even though the bureau has a limited number of people to do the job. That lack of manpower concerns drillers itching to get back to work.

Bromwich said what could slow things down is the time oil and gas companies are going to need to have their applications in order. And his agency will need time to ensure the paperwork complies with all the new rules.

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