The ban on deep water drilling in the Gulf of Mexico may have been lifted seven weeks early, but the oil industry is reluctant to celebrate.
Corporate reaction to the administration’s announcement ranged from the grudging “a first step”, to the downright sceptical “a hollow gesture”.
The industry consensus was that while lifting the moratorium was a necessary condition for activity in the gulf to recover, it would certainly not be sufficient.
Before any new wells can be drilled, they will need permits from the Bureau of Ocean Energy Management, and since the Deepwater Horizon disaster on April 20, the regulator has been extremely reluctant to issue approvals.
Jim Noe of Hercules Offshore, a drilling contractor, who speaks for the industry that works in the shallow waters of the gulf, said he expected the end of the moratorium to be “a completely hollow gesture”. In the shallow water, there has been no formal ban on drilling, but activity has slowed sharply because of delays in securing permits from the BOEM.
In the five months since April 20, there have been just 12 approvals for new wells in the shallow waters of the gulf.
In normal times, there would typically be between 10-15 permits awarded every month.
“From the experience of the shallow water, what we hear out of Washington on this is meaningless,” Mr Noe said. “In the deep water, their problems will probably be even worse.”
Chevron, the second largest US oil group, which has been a pioneer in the deep waters of the gulf, said: “Lifting the moratorium is the first of two steps needed to return thousands of people to work in the Gulf of Mexico. The second step is for the BOEM to issue deep water and shelf drilling permits as soon as possible.”
The BOEM was formed after a shake-up at the old Minerals Management Service, the previous oil and gas regulator, which underwent radical restructuring after regulatory failures were perceived to have contributed to the Deepwater Horizon disaster.
Many oil executives believe the BOEM lacks the capacity to handle applications efficiently and quickly, and officials are terrified of being seen to wave projects through too easily.
The pressure on the agency was shown by the response on Tuesday from environmental groups, including Greenpeace and the Natural Resources Defense Council, which strongly criticised the decision to lift the moratorium.
Regulatory delays, the industry says, will lead to a shortfall in US oil production below that which could have been achieved, a shortfall lasting for many years.
Roughly 30 per cent of US domestic oil and about 15 per cent of its natural gas comes from the gulf.
Joseph Mason, a professor at Louisiana State University who has studied the impact of the moratorium, says it will be several months, “at best” before economic activity ramps up in the region.
The industry argues that if the administration is serious about restoring oil production growth, it should focus on a clear and speedy process to issue permits.
Michael Bromwich, the director of the BOEM, said on Tuesday that 20 staff had been reassigned to the reviewing of shallow water drilling permit applications. The lifting of the deep water ban will create additional workload for the agency and Mr Bromwich said the BOEM needed more resources to meet demand.
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