The approval process for "Applications for Permits to Drills" (APDs) has ground to a halt following the six-month imposed drilling moratorium put in place on May 30, 2010. We note that while two Notices to Lessees and Operators (NTLs) from the Bureau of Ocean Energy Management Regulation and Enforcement (BOEMRE, was formerly the MMS) for new safety requirements along with guidelines for additional information on drilling plans were issued on June 8, 2010 and June 18, 2010, approvals for drilling plans in waters less than 500' have yet to take hold. Just one APD that was submitted since May 30, 2010 has been approved (to Apache on July 7, 2010) in what can only be described as federal feet dragging.
Typically, APDs are a leading indicator for jackup utilization. For example, after issued APDs fell 50% in 2008/09, GOM jackup utilization subsequently dropped 50%. Obviously, the current slowdown in permit approvals (zero for nearly six weeks versus an average of 32 per month YTD through May) will impact utilization. There are currently 28 jackups in the Gulf of Mexico operating in either drilling or workover status. We would not be surprised if that number fell below 20 before year end due to the gap in permit approvals. We have summarized the deterioration of activities for both jackups and deepwater rigs since the beginning of the oil spill below:
Although the APD permitting picture reflects the current posture of the administration, other types of permit approvals are already starting to rebound. Approvals related to "Revisions for New Wells" and "Revisions For Sidetracked Wells" both appear to be picking up steam. Proponents of continued further development of the Gulf of Mexico can point to many factors that collectively are quite compelling. Please see our article Looking Ahead to GOM Snap Back for more details.
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