By Ayesha Rascoe
WASHINGTON (Reuters) - Before BP's record Macondooil leak, U.S. regulators approved about a dozen permits amonth to drill in the shallow waters off the Gulf. Since then,they've barely managed one a month, even though a six-monthmoratorium only affected wells in much deeper waters.
Now, with only two months or less until operators are ableto resume drilling new wells in one of the most prospective oilfrontiers in the world, many fear that the newly tightenedreins of regulators may choke investment for months longer.
"The shallow-water story is a template for the waydeepwater drilling can unfortunately go," said Jim Noe, asenior vice president at Hercules Offshore Inc andhead of a coalition of shallow water drillers protesting theslow pace of permitting.
Most of the Gulf's major untapped reserves lie in watersdeeper than 500 feet. So U.S. crude production and corporateprofits for deepwater drillers would both be crimped if morerigorous approval standards -- and longer time frames -- areapplied to new deepwater drilling permits.
Firms such as Chevron , Royal Dutch Shelland Noble Energy have already postponed projects in thewake of the drilling ban, imposed after the Deepwater Horizonrig ruptured an undersea well in April, sending millions ofbarrels of oil into the Gulf.
Noble does not expect to be able to restart its explorationprogram in the Gulf until late 2011, the company's chiefexecutive said last week.
In turn, that is almost certain to slow development of newoilfields the government has been counting on to limit itsreliance on foreign crude. This could hinder efforts to boostdeepwater Gulf output to the government's forecast level of1.68 million bpd in 2013 and 1.71 million bpd by 2020.Production was 1.23 million barrels per day in 2009.
SHALLOW WATERS, DEEP DELAYS
In first three months of 2010 prior to the oil spill, thedepartment greenlighted 32 new shallow water wells, an averageof about 11 a month.
Since the April 20 rig accident, the department hasapproved just six new wells, as the regulator with limitedmanpower seeks to ensure that tough new standards are strictlyfollowed.
Interior has acknowledged that it is taking longer toapprove permits under its new rules, which include a mandatethat companies certify they have working blowout preventers.
Bromwich, head of the Interior's Bureau of Ocean EnergyManagement, stressed the agency would not "speed up for thesake of speeding up," however.
He would not speculate on how long it would take to approvethe first new deepwater drilling permit after the moratorium islifted, but said some companies may be more prepared to meetthe new rules than others.
There's no shortage of equipment to get things movingquickly: So far, only four of 30 deepwater rigs are leaving orhave abandoned the Gulf, including two rigs owned by DiamondOffshore Drilling Inc, and two owned by Transocean Ltd.
Officially, the moratorium is forecast to cut an average of82,000 barrels per day in oil output from the Gulf next year,or just about 1.5 percent of total U.S. national production,according to the Energy Information Administration's latestoutlook. (Graphic: http://link.reuters.com/neg24p )
Gulf production will most likely fall by more than that,since the estimate is based on the assumption that drillingwill immediately resume at a normal pace after the moratorium,says Gary Long, a petroleum engineer with EIA.
"Based on the reality of the situation, you could probablytriple those numbers, maybe even more," says Phil Flynn ofPFGBest Research.
A year-long delay on new deepwater projects stemming fromthe Gulf of Mexico well rupture could cut world oil supply by500,000 barrels per day between 2013 to 2017, according toBernstein Research.
LONGER LEAD TIMES
Eventually companies will be able to factor longerpermitting times into their planning, but in the near-termextended delays will be a drag on output, Long said.
"The problem is everything in the industry was geared to amuch shorter time frame, so when all of a sudden that timeframe gets extended...you've got rigs under contract and youdon't have permits for them to actually drill the well," Longsaid.
Some groups believe the Obama Administration is right to becautious, saying U.S. oversight of the energy sector has beenlax for too long. Elgie Holstein, oil spill responsecoordinator for the Environmental Defense Fund, said there is aperiod of adjustment that follows implementation of any newregulatory regime.
"I think we're unlikely to see a return to the days whenthe Interior Department felt that it was under great pressureto approve permits as quickly as possible," said Holstein, whohelped author a report for the Bipartisan Policy Centerexamining the usefulness of the moratorium.
"But I do think the department is interested indemonstrating that it is not about the business of trying tostop or seriously delay the return to work," he added. (Graphic by Jasmin Melvin; Editing by David Gregorio)