When federal officials lifted the ban on deep-water drilling in early October, Houston-based ATP Oil & Gas was ready to roll.
The small production company was finishing up work on a well that tied into its Telemark production hub about 100 miles south of the mouth of the Mississippi River. It had filed a permit to drill a sidetrack off an existing well — a relatively low-risk proposal for the world of deep-water drilling. It was even revised and updated to meet all of the new requirements imposed on deep- water permits in the wake of the Deepwater Horizon accident.
“So I kept the crew out there because I felt certain the government meant what it said,” ATP Chairman and CEO Paul Bulmahn said – that permit applications that met the new guidelines would be granted.
More than 70 days later, the company is still waiting. At a price of about $330,000 per day, Bulmahn has started to get impatient, leading him to take some actions unusual for the company.
First, ATP hired Washington, D.C., lobbyists for the first time to help push its cause.
“I usually look with great disdain on lobbying efforts,” Bulmahn said.
Then he wrote a personal letter to President Barack Obama – copied to Secretary of the Interior Ken Salazar and Michael Bromwich, director of the Bureau of Ocean Energy Management, Regulation and Enforcement – pleading with him to “Please issue a permit so we can go back to work.”
And on Sunday he ran the letter as an advertisement in the Chronicle.
“I can’t afford to keep these workers employed and playing cards,” Bulmahn said.
De facto moratorium?
It’s a notion shared by many in the industry, which says a de facto moratorium remains despite the Oct. 12 announcement that the Gulf was open again for business. The administration says that’s not the case, however, and that the bureau has added staff to work through the backlog of permit applications.
The bureau doesn’t comment on specific permit applications that are still pending because the information is considered proprietary to the companies.
In the next few days, Bulmahn said he may have to pull the plug on the project, meaning some 200 workers will be off the clock or headed to work on offshore projects overseas. It’s not just an idle threat: On Monday Israeli media reported that ATP was considering taking a stake in several offshore natural gas projects there.
“I can’t comment on such speculation,” Bulmahn said. “But the technology we’ve brought to bear in the deep water is being courted by governments around the world to help open up their natural resources offshore.”
25 in shallow water
That’s not to say there are no permits being issued in the Gulf of Mexico. Since July there have been 25 shallow-water permits issued, including six in December. Only 10 of those permits have seen drilling, however, meaning companies are choosing to hold off on putting crews back to work.
Only one of 15 new deep-water well permits has been granted since the moratorium was lifted on Oct. 12, with two pending as of Monday, according to the bureau’s data.
But federal officials note 60 permits to modify existing deep-water plans have been granted, as well as 49 revised permits to modify well plans.
That a company like ATP must wait to get a deep-water permit is particularly frustrating to the industry, said Stephen Berman, a senior research analyst with Pritchard Capital Partners.
The company buys proven, undeveloped reserves – wells that have been drilled but deemed uneconomic by larger companies. That means it’s often drilling in existing wells, often less risky than exploration wells such as BP’s Macondo well that was being completed when it blew out in April, killing 11 workers and leading to the largest oil spill ever in the Gulf of Mexico.
The company’s equipment tends to have more safeguards than many other operators’ – deploying blowout preventers on both the seafloor and onboard the rig, for example, Berman said.
“ATP has the right business model and equipment for the post-Macondo world,” Berman said. “They should be near or at the front of the line when the new permits for deep water start. But I can see their frustration as what appears to be a lot of foot-dragging.”
While new wells can take years to reach production – meaning there’s little direct correlation between current oil prices and new drilling – Berman said he suspects rising oil prices will likely increase the pressure on the administration to move forward issuing deep-water permits.
“The deep-water Gulf is where the large finds are, so if you’re not making them, there’s even more of a feeling of supply being constrained,” Berman said.
Photo: Hundreds of cranes and vessels are at a standstill at Port Fourchon Friday Dec. 3, 2010, in Golden Meadow, La. The typically bustling port has slowed since the moratorium of drilling in the Gulf of Mexico. (AP/Kerry Maloney)