Feds approve Shell deep-water exploration plan

Federal regulators today approved an offshore exploration plan that would pave the way for Shell to drill five new exploratory wells in its Appomattox prospect in the Gulf of Mexico.

Under the just-approved exploration plan, Shell would still have to obtain separate drilling permits before it can begin work on the wells, which would be located in roughly 7,160 to 7,259 feet of water about 72 miles offshore Louisiana.

Shell’s deep-water exploration blueprint is the second such plan to get the government’s green light since last year’s Gulf spill, when federal regulators committed to conducting environmental assessments of those proposals. On March 21, Shell actually nabbed the first exploration plan approval, covering three proposed wells in its Cardamom Deep discovery.

Shell Oil Co. President Marvin Odum called the Appomattox field a “significant new oil discovery.” After appraisal wells were drilled last year — before the nearby blowout of BP’s failed Macondo well — Shell and partners on the project estimated that more than 250 million barrels of oil equivalent could be recovered from the site.

Shell operates and holds an 80 percent working interest in the Appomattox project. Its partner on the project, Nexen, holds the remaining 20 percent interest.

Odum said the two exploration plan approvals should bolster Shell’s arguments that it can safely drill wells in Arctic waters near Alaska. The company is asking the Bureau of Ocean Energy Management, Regulation and Enforcement to green light drilling of up to 10 wells in the Chukchi and Beaufort seas in 2012 and 2013.

“With this approval, Shell has, again, met new deep water regulatory requirements, including an environmental assessment,” Odum said. “After decades of responsible offshore drilling operations in environments around the globe, this approval is further evidence of Shell’s expertise and confidence in the offshore and should be strongly considered as Shell moves forward with additional exploration in both the Gulf of Mexico and Alaska. These sizable energy resources can bring more secure, domestic energy to US consumers.”

In approving Shell’s supplemental exploration plan, the ocean energy bureau assessed the environmental consequences of the company’s proposed drilling and concluded there would likely be “no significant impact” from the work.

“This exploration plan was reviewed under the heightened standards we are now using to conduct site-specific environmental assessments,” said Michael Bromwich, the bureau’s director. “The standards are higher than they used to be, and further support our goal of ensuring that deep-water exploration is done more safely and with greater protections for the environment than ever before.”

Although today’s approval is another step forward for companies looking to launch new drilling in the Gulf of Mexico, analysts are anxiously watching for a bigger milestone: the ocean energy bureau’s first approval of an initial exploration plan, which, as a completely new proposal, may have to survive more environmental scrutiny. (By contrast, the two exploration plans approved so far have been supplemental ones that made changes to pre-approved, existing drilling plans).

The ocean energy bureau is now reviewing an initial exploration plan submitted by BHP Billiton Petroleum Americas that proposes one exploratory well in approximately 4,468 feet of water approximately 124 miles offshore Louisiana.

Federal regulators also are assessing seven other Gulf of Mexico exploration plans — a potential backlog that could tax the ocean energy bureau as it tries to meet a statutory deadline to approve or reject those plans within 30 days.

The Obama administration and presidential spill commission want Congress to extend that 30-day deadline. Bromwich has repeatedly stressed the timeline could be unrealistic when the clock is ticking on several offshore exploration plans at the same time, as is the case now.