Another Deepwater Permit? Yeah – For A Well That’s Already Been Drilled

Yep. You read that headline correctly.

Today, the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) gave out its third permit for deepwater drilling.

ATP Oil & Gas Corporation (NASDAQ: ATPG), a Houston-based international offshore oil and gas development and production company focused in the Gulf of Mexico, Mediterranean Sea and North Sea, today announced that it has received a permit to resume drilling the Mississippi Canyon (“MC”) Block 941 #4 well in the deepwater Gulf of Mexico, about 90 miles south of Venice, Louisiana.

“This permit for the ATP Titan drilling and production platform is the first for a stationary deepwater facility since deepwater drilling was allowed to resume on February 28, 2011. The previous two permits to drill oil and gas wells approved by BOEMRE in 2011, both of them in the last 18 days, are for wells drilled by Mobile Offshore Drilling Units (MODU),” stated T. Paul Bulmahn, ATP’s Chairman and CEO in a company release. “We are ready and eager to return to work. ATP has always drilled safely and environmentally soundly. We are looking forward to delivering on our objectives to generate near-term production growth from these developments.”

But here’s an interesting tidbit from the release…

The MC 941 #4 well at ATP’s Telemark Hub in 4,000 feet of water was drilled to approximately 12,000 feet and cased during 2009. Operations to finalize drilling and completion will begin within the next 24 hours. ATP operates the deepwater Telemark Hub with a 100% working interest and owns 100% of the subsidiary that owns the ATP Titan and associated pipelines and infrastructure.

In other words, this is an old well that was awaiting completion 11 months ago when the Deepwater Horizon exploded and sank.

In fact, Bulmahn had written a letter to President Obama on December 20 of last year regarding the very permit now issued three months later. The letter read as follows…

President Barack Obama
The White House
1600 Pennsylvania Avenue NW
Washington, D.C. 20500
RE: Please issue a permit so we can go back to work.

Dear Mr. President,

The cost of gasoline at the pump is already climbing over $3.00 per gallon.  The moratorium which shut ATP Oil & Gas Corporation down in the Gulf of Mexico – though ATP has always drilled safely and environmentally soundly — was lifted October 12th, 2010.  As Christmas approaches, the industry is still awaiting the first deepwater drilling permit to be approved. Because the moratorium was lifted, we had hope that we would be able to resume work.

ATP continues to keep a large team of skilled drillers standing by idle.  ATP will be forced to lay off these talented people during the Christmas season without a permit from you.

Our drilling platform constructed entirely in the U.S. with U.S. labor, the ATP Titan, installed in 2009, is state of the art.  The ATP Titan was designed three years before the BP spill with safety redundancies like a surface blowout preventer (BOP) on the platform deck and  subsea shut-in isolation device (SID) with controls independent of the rig’s surface BOP.  We believe it is the most advanced safety-engineered drilling system in the world and the SID was designed such that it can be used as a cap for containment purposes at the sea floor.

ATP’s permit application, now designated Revised Permit to Drill OCSG 16661, Mississippi Canyon Block 941, Well #4, API #608174115200, was originally filed in July, 2009.  It has been supplemented, revised and amended with every additional addendum required, requested or suggested by your regulatory agency BOEMRE, including resubmission of a revised Oil Spill Response Plan with new compliance calculation methods for worst case discharge.

The Mississippi Canyon Block 941, Well #4 is already drilled and cased to 12,000’ and is essentially a sidetrack of an existing wellbore into a producing reservoir.  The reservoir has known characteristics, temperatures, pressures and formation fluid properties because it has been penetrated by five previously drilled wells. The well location was approved by the government in June 2008 under the development plan originally filed and approved.

ATP is committed to help the U.S. become less dependent on foreign energy by developing our own resources. Every barrel of oil produced in the U.S. is one less barrel of oil that we must import on tankers.   ATP is part of the domestic industry which safely drilled 58,375 wells over 60 years in the Gulf of Mexico before Macondo.  BP’s partner in the well, Anadarko, has claimed BP was “grossly negligent”.  ATP instead has earned a reputation for safety, environmental responsibility and skillful utilization of advanced technology.

Please Mr. President, give ATP a permit to return to work rather than forcing more American jobs to be lost. Just approving this one permit of the six ATP is pursuing will help support your cause of keeping jobs and stimulating the economy.

Sincerely,
ATP OIL & GAS CORPORATION
T. Paul Bulmahn
Chairman & CEO
Cc: Kenneth L. Salazar, Secretary of the U.S. Department of the Interior
Michael R. Bromwich, Director of the BOEMRE

As said above, it took a full three months later before ATP was able to get the permit to resume drilling on the well described in the letter.

Jim Adams, president and CEO of the Offshore Marine Service Association (OMSA), sounded a familiar tone at the news of the ATP permit.

“There were 32 deepwater drilling operations already permitted when the President imposed his moratorium last year. Interior Secretary Salazar is merely allowing existing permit holders to resume their operations,” said Adams. “This administration has yet to approve and permit a new deepwater exploration proposal submitted in the last 11 months.”

Adams continued, “Secretary Salazar is treating Gulf workers like peasants, tossing us work crumb by crumb and expecting us to be grateful,” Adams said. “We’re tired of fighting for scraps. We want to get back to work—all of us, not just a handful of crews.”

Adams noted that the Secretary Salazar’s latest announcement follows on the heels of another round of Congressional hearings this week on the Obama administration’s de facto moratorium on deepwater drilling in the Gulf.

“It still takes Congressional intervention or court orders to compel the Interior Department to issue a scant number of ‘permits’,” Adams said. “And still, energy producers don’t have a clear picture of what it takes—or how long it takes—to satisfy Secretary Salazar.”

“No one is sure what Secretary Salazar really wants,” Adams added. “All we want is to get back to work.”

“This drilling permit is welcome news, but a mere drop in the bucket for where we need to be,” added Sen. David Vitter (R-LA). “I’ll continue my hold on the Obama’s Interior Department nominee until at least 15 new deepwater exploration well permits are approved. The de facto moratorium has destroyed jobs in Louisiana, contributed to the bankruptcy of at least one major employer, forced layoffs at others, and could force everyone to have to pay for $4 for a gallon of gasoline.”

The ATP news isn’t the only piece of information coming out of BOEMRE in the last couple of days. It seems another familiar offshore player received a permit as well. From Rigzone.com

The Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) provided the final approval necessary for Petrobras America to begin oil and natural gas production at its Chinook-Cascade project using a Floating Production Storage Offloading (FPSO) facility. This will be the first time this technology is used in the U.S. Gulf of Mexico. BOEMRE approved the project’s Production Safety System permit and Supplemental Deepwater Operating Plan (DWOP), to ensure that stringent safety regulations were met. The FPSO has a production capacity of 80,000 barrels of oil per day and 16 million cubic feet of natural gas per day. With the completion of this final regulatory step, production from this facility is expected to begin in the near future.

The Cascade-Chinook oil and natural gas project, located in the Walker Ridge area of the Gulf, approximately 165 miles offshore Louisiana in 8,200 feet of water, will use an FPSO, the B.W. Pioneer, which is a floating facility that has the capability to process oil and natural gas, store the crude oil in tanks located in the facility’s hull, and offload the crude to shuttle tankers for transportation to shore. Natural gas processed by the facility will be transported to shore by pipeline. Petrobras’ FPSO will be equipped with a disconnectable turret-buoy. In the event of a hurricane or tropical storm, the facility is designed to disconnect from the turret-buoy and move off location until the storm has passed.

“These regulatory approvals pave the way for safe, new production of oil and gas resources in the Gulf of Mexico,” said BOEMRE Director Michael R. Bromwich. “They reflect enormous and sustained effort by both BOEMRE and Petrobras personnel and represent the commitment shared by government and industry to the safe production of our country’s offshore energy resources.”

Petrobras, of course, is the Brazilian state oil company. Its largest private stakeholder is one George Soros, who has a position in the company valued as high as $811 million in 2009. And in August of 2009, the Obama administration gave its blessing to the U.S. Export/Import Bank to provide a $2 billion loan to that company to provide capital for the development of the Tupi offshore field in Brazil. Vitter this week sent a letter to the Export/Import Bank asking whether any return on investment has been realized out of that loan in terms of promotion of exports to Brazil – a stated purpose of the president’s visit there this weekend.

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