The US Bureau of Ocean Energy Management, Regulation and Enforcement, BOEMRE, has notified 13 companies that they will be able to resume drilling in the Gulf of Mexico without needing to submit new environmental studies. The companies will, however, be required to comply with new rules and regulations since the explosion of the Macondo well operated by BP plc (NYSE: BP) last April that killed 11 workers.
Twelve of the thirteen companies or their subsidiaries are publicly traded: Anadarko Petroleum Corp. (NYSE: APC), ATP Oil & Gas Corp. (NASDAQ: ATPG), BHP Billiton plc (NYSE: BHP), Chevron Corp. (NYSE: CVX), Cobalt International Energy, Inc. (NYSE: CIE), ENI SpA (NYSE: E), Hess Corp. (NYSE: HES), Marathon Oil Corp. (NYSE: MRO), Murphy Oil Corp. (NYSE: MUR), Noble Energy Inc. (NYSE: NBL), Royal Dutch Shell plc (NYSE: RDS-A), and Statoil ASA (NYSE: STO).
There are 16 drilling projects covered by the agency’s ruling and drilling could resume within a few weeks. Any resumption would require the driller to comply with requirements issued in December that aim to ensure that drillers have a approved plan for containing the oil in the event of a blowout. It’s not clear that all 16 projects meet that requirement or how long it will take for the requirement to be met.
US crude production will lose about 220,000 barrels/day in 2011 as a result of the Gulf disaster, about 13% of offshore production. For the US economy, that means more imports at higher prices. For the economy of the Gulf coast states, the temporary loss of 8,000-12,000 jobs just goes on and on.
Drillers have been holding idle rigs in the Gulf, waiting for permits to go ahead with their projects. But that can’t continue indefinitely at costs of hundreds of thousands of dollars a day. Smaller companies, like ATP Oil & Gas, can afford to wait even less than the majors like Chevron and Shell. Permits that once took just days to get approved, can now take up to five months.
For its part, the BOEMRE says it has approved some permits for modifications to existing wells, but that the agency’s priority remains safe and environmentally responsible development.
While Gulf production is stalled, the missing 220,000 barrels/day add to the volatility of the crude market. If crude rises above $100/barrel this year, the federal government will take some serious heat for the increase. The heat will turn to flames if gasoline prices rise to $4/gallon.