rigzone<>Analysis: Moratorium In Gulf Gets Graver by Trey Cowan | Rigzone | Friday, May 28, 2010
The recent decisions by President Obama and his administration to extend the moratorium on new deepwater drilling in the Gulf of Mexico (GOM) by six months, to recapitulate on activities in the Arctic, to cancel the upcoming lease sale originally scheduled for August 2010, and to lengthen the shallow water permitting process beyond 30 days will collectively take their toll on offshore operators and drillers.
Rigs currently contracted in GOM include 41 jackups and 34 deepwater units. From an employment perspective, the International Association of Drilling Contractors (IADC) estimates that the GOM offshore industry employs approximately 75,000. Activities levels for both employment and wells drilled offshore may be trimmed as operators react to the economic dynamics imposed by the President's decisions. Specifically, all deepwater rigs will suspend drilling operations in the Gulf of Mexico for the next six months (see attached report - PDF - from Interior Secretary, Ken Salazar for more details).
While it may be too early to draw conclusions from recent trends in permitting activities, given the relative newness of all the changes at hand; we have nonetheless pulled some data together that will provide a backdrop for looking at these trends going forward.
Past experiences dictates that plans filed with the Minerals Management Service (MMS) do not always lead to actual drilling offshore. Based on activity reported between 2008 and 2009, we found that 95 out of 237 leases or approximately 40% had a wellbores spudded. What is interesting to note is that activity diminished versus actual plans as time elapsed (i.e. three-quarters of drilling activity occurred within 90 days of planned drilling start date). The chart below provides the likelihood of a well being drilled on a lease based upon actual results from 2008 and 2009.
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