US Interior Dept. Offers Deepwater Drilling Moratorium Details

WASHINGTON (Dow Jones Newswires), May 31, 2010

The Obama administration said on Sunday that a six-month ban on drilling exploratory oil and gas wells in the deep waters of the Gulf of Mexico applies in a broad sense, including a moratorium on adding to deepwater exploratory wells that have already been drilled.

The U.S. Interior Department provided details days after U.S. President Barack Obama responded to a widening BP oil spill in the Gulf of Mexico by halting much of the planned or current exploratory drilling off U.S. coasts. On Friday, after the U.S. president announced the moratorium, oil and gas companies including Exxon Mobil and Marathon Oil began halting exploratory drilling in the deepwater.

The U.S. Interior Department said on Sunday that the moratorium requires oil and gas companies "to cease drilling new deepwater wells, including sidetrack and bypass activities." Sidetrack and bypass wells are typically drilled after exploratory wells have already been bored into the sea floor, and are frequently initiated when drilling companies are trying to work through issues that have occurred after the drilling, or "spudding" of an initial well.

The Interior Department also said that deepwater wells include any wells located 500 feet or more below sea level. Deepwater drilling is typically defined as drilling that occurs in depths of 1,000 feet or more. U.S. Interior Secretary Ken Salazar had told reporters last week that the moratorium applied in depths greater than 500 feet, and the "notice to lessees" issued on Sunday confirmed the Obama administration's intentions.

Oil produced in the deep waters of the Gulf of Mexico accounts for at least one-quarter of domestic oil production and at least 5% of domestic gas production, based on Energy Information Administration data that classifies deepwater drilling as activities occurring in depths of 1,000 feet or more. While the six-month moratorium will not affect current oil or gas production, the ban could affect future supplies in the offshore areas that are the predominant source of oil from the Gulf of Mexico. 

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