Chevron wins approval to drill first deep-water wildcat since spill

Chevron won approval today to continue drilling an exploratory well in the Gulf of Mexico — the first deep-water wildcat to be permitted since last year’s oil spill.

Under a permit issued by the Bureau of Ocean Energy Management, Regulation and Enforcement, Chevron will be allowed to drill a new well in a previously untapped reservoir in the Gulf of Mexico.

Although it is the fifth deep-water drilling project to be permitted since the Obama administration lifted a ban on that work last October, Chevron’s well would be the first in an unknown reservoir where oil or gas has not been produced.

The other permits — all issued in the past four weeks — have gone to projects where wells have already been drilled and discoveries have been made.

Here, Chevron is drilling an exploratory well in 6,750 feet of water at its Moccasin project in hopes of discovering oil and gas. The company is effectively making a $1 million-per-day gamble that it will discover oil at the site.

The company first began drilling the well last March, a month before the blowout at BP’s Macondo well. Drilling was suspended on June 9.

The project is located in Keathley Canyon Block 736, approximately 216 miles off the Louisiana coastline and 190 miles southeast of Houston.

Michael Bromwich, the bureau director, said the permit approval “further demonstrates industry’s ability to meet and satisfy the enhanced safety requirements associated with deep-water drilling, including the capability to contain a deep-water loss of well control and blowout.”

The permit could amplify concerns about the reliability and strength of emergency devices known as blowout preventers, following a report Wednesday on the one used at BP’s doomed well in the Gulf. A four-month investigation of that blowout preventer revealed that it was unable to successfully shear through drill pipe and seal oil and gas underground because that pipe had buckled and shifted off center.

Offshore drilling advocates cheered the permit approval. Randall Luthi, president of the National Ocean Industries Association, said that while all of the deep-water permits issued to date are good news, “today’s approval of a permit for truly new deep-water exploration in the Gulf of Mexico is particularly noteworthy and is a milestone we have been awaiting.”

“We are encouraged that the backlog of permit applications is slowly growing smaller, and that some of our member companies who were sidelined for the past year will soon get back to work in the Gulf,” Luthi added.

The ocean energy bureau has focused on restarting 57 deep-water drilling projects that were approved before last year’s spill, including 16 where drilling had begun. Those previously permitted projects have been grandfathered from undergoing environmental assessments that will be done on all new deep-water drilling proposed since last year’s spill.

To win the permit, Chevron had to prove to regulators it could swiftly control any blowout at the site and trap gushing crude. The company said it would rely on the marine capping stack and other equipment provided by the Marine Well Containment Company in case of a sub-sea blowout.

Chevron joined three other major oil companies — Exxon Mobil, Shell and ConocoPhillips — to form the MWCC after last year’s spill. BP, Apache Corp. and Anadarko Petroleum Corp. have since joined the containment company.

If you’re keeping score, here are the permits that have been issued so far for offshore exploration projects that were blocked by last year’s ban on some deep-water drilling:

10 Comments

  1. denmond

    The company is effectively making a $1 million-per-day gamble that it will discover oil at the site.
    ———–

    With 50+ other original permits still pending, and not even counting any new permit requests that would have been placed since, that means that the Gulf Coast is LOSING $50 million-per-day in economic activity. That’s $1.5 BILLION a month. That’s a lot of workers, goods, and services that aren’t getting paid. It’s also a lot of lost tax revenue. And for work that would have had actual oil&gas production, that’s additional lost revenue, supply, and again, more lost tax revenue. Having only reissued only 5 of the original 57 to this point is nothing but irresponsible. How much longer will this administration keep dragging this out?

    #1
  2. Elowe

    didn’t shell get a permit?

    #2
  3. Tom Fowler

    Elowe:
    The Shell permits were for an operation that wasn’t banned (I think a water injection well) and they got a drilling plan approved, which clears the way for specific permit applications. It’s really confusing at times, but Jen Dlouhy is on top of it for us in D.C.

    #3
  4. Signal2Noise

    Denmond, your statement of “And for work that would have had actual oil&gas production” is not valid. Wildcat wells at-best are about a 1-8 chance to turn into a producer. In deepwater that ratio is probably much less. And then if Chevron does find a producible reservoir, it’s 5-7 years away from first oil/gas. Issuing a permit is no panacea for success in exploration or mitigating supply needs.

    #4
  5. Trail Trash

    Signal2Noise I believe some of the rigs that had to pull off while in the process of drilling were on development wells.

    #5
  6. CajunShooter

    But still, this article is still misleading, 100%!
    Chevron had spudded this well back in March and then had to suspend it due to Macondo.

    So, NO NEW PERMIT TO DRILL WAS ISSUED… I love how the Government plays on these words…

    #6
  7. Trail Trash

    No CajunShooter, from what I was told by a landman who is working on getting permits through the BOE, this is the first permit for a bona fide never been spudded before exploratory well.

    #7
  8. Tom Fowler

    I think they got to around 23,000 feet on this well before they had to stop in June 2010 due to the moratorium.

    #8
  9. Trail Trash

    Tom is right. They had started drilling on the Moccasin propect back in March, but the landman I talked to made it sound like they were going to spud a new well. Maybe a step out.

    #9
  10. Elowe:

    On Monday, Shell won approval of its exploration plan — the blueprint for drilling three new wells in the deep-water Gulf. Before it can drill those wells, however, Shell has to get individual drilling permits for them. The company has already submitted one application for a permit to drill one of those three wells described in its exploration plan.

    The five wells that were blocked by the deep-water drilling ban and have been permitted in the past four weeks are part of a pool of 57 projects that were permitted — and in some cases spudded — before the moratorium was imposed.

    If Shell wins permits to drill any of the deep-water wells in its just-approved exploration plan, that will be a post-ban milestone, because those projects weren’t previously permitted before the spill. Unlike the previously permitted wells, any truly new drilling permit applications are being subjected to environmental assessments under a federal law known as NEPA. The government routinely used “categorical exclusions” to waive those environmental assessments before the oil spill.

    #10