Chevron exec sees ‘new normal’ in deepwater Gulf, analyst says

Drilling activity in the deep water Gulf of Mexico, though still not back to levels seen before the BP spill,  may represent a “new normal” for the U.S. offshore region, said George Kirkland, a senior vice president at Chevron Corp., according to an analyst report today from Deutsche Bank.

The prediction came in a meeting in Boston with the investment bank and as tougher safety and environmental regulations enacted after the deadly Macondo well blowout in April 2010 continue to slow the pace of new drilling permits, forcing producers to scale back exploration programs.

Amid the slowdown, some smaller players, including Murphy Oil, have weighed exiting the deepwater Gulf amid the slowdown and rising operating costs in the region.

This could be a good thing in the short run for oil majors like Chevron, as it would lessen competition, reduce service costs, expand exploration opportunities and crimp oil supplies, boosting prices, Deutsche Bank analysts said.

But such a situation would likely prompt the U.S. government to intervene with less onerous regulations, they said.

Thirty-three deep-water drilling rigs were idled when the Deepwater Horizon drilling rig exploded, killing 11 workers and triggering a massive oil spill. Since then, nine have departed the Gulf for contracts elsewhere.

Today, the deepwater drilling rig count — that is, rigs that are actually drilling, rather than doing plug-and-abandonment work or other workover activity — is at 60 percent of levels seen before the accident, according to oil field services firm Schlumberger.