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Gulf of Mexico Update

Today the Secretary of the Interior Ken Salazar gave an update on some of the future of offshore drilling in the Gulf of Mexico.  He announced that a drilling moratorium will remain in place off the eastern Gulf of Mexico for at least 7 years.  At first blush the headline of a moratorium remaining in place sounded like a clear cut negative.  In March it was announced that some exploration would be considered in the area, but the reality is this was a long-shot to happen anytime soon before the Macondo spill, and clearly off the table after it.  While there is an estimated 3.7 billion barrels of oil and 21.5 trillion cubic feet of gas in the Eastern Atlantic, only exploratory drilling could tap into the resource.   Therefore this area wasn't even in play for drillers who have a sole focus on development wells; an example being ATP Oil and Gas,

While today's announcement changes some potential investment plans down the line for the majors, it can be seen as a positive for some of the current smaller players in the gulf with operating leases.  To quote Ken Salazar, "We are adjusting our strategy in areas where there are no active leases," the administration has decided "not expand to new areas at this time" and instead "focus and expand our critical resources on areas that are currently active" when it comes to oil and gas drilling."
 
To read between the lines, getting through the current backlog in permitting within the BOEM has become a major priority.  Rather than shifting focus elsewhere, it will now move to truly opening the Gulf back up for business.  When Louisiana State Senator Mary Landrieu gave up her leverage by no longer blocking the appointment of Jack Lew, it appeared that she didn't get anything in return.  However, the administration didn't want to appear as if her leverage strong armed them into doing something they weren't ready to do.  So by waiting a week to announce the new focus on current leases in the middle of limiting future exploration they have saved face. 

Below is a link to the BOEM's webpage where the permitting information will be updated daily and the table as of 12/1.  It will be interesting to watch the numbers to see how many permits to drill move from the pending to approved column as the next few months move on. 

http://www.gomr.boemre.gov/homepg/offshore/safety/well_permits.html

Shallow and Deepwater Permits to Drill

Data last updated on 12/01/2010 09:10 AM (NYSE:CST)
and will be updated each business day.

Permit
Type

Submitted since
June 8, 2010

Pending as of
December 1
, 20101

Approved from
June 8, 2010
through
December 1, 20102

Water Depth Less than or equal to 500 feet
(Pending/approved permits may include applications submitted before June 8, 2010)

New Well

21 6 19

Revised New Well

49 3 52

Bypass

12   12

Revised Bypass

6   6

Sidetrack

38 10 39

Revised Sidetrack

50   53
Permit to Modify 1542 118 1483
Revised Permit to Modify 1030 38 1029
Water Depth Greater than 500 feet
(Pending/approved permits may include applications submitted before October 12, 2010)

Permit
Type

Submitted since
October 12, 2010

Pending as of
December 1, 20103

Approved from
October 12, 2010
through
December 1, 20104

New Well

A new well involves an operator drilling an original
wellbore hole in the seafloor to a geologic target.
2   1

Revised New Well

5 4  

Bypass

1 1  

Revised Bypass

  1  

Sidetrack

1 1 1

Revised Sidetrack

4 1 2
Permit to Modify 40 20 30
Revised Permit to Modify 36 10 34





Disclosure: Long ATP