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BP Plans Slow Return To Gulf Drilling

Date: 27-Jul-11
Country: BRITAIN
Author: Tom Bergin

BP Plc has not yet applied for permission to drill its first new Gulf of Mexico oil well since the 4 million-barrel Macondo spill a year ago, the oil major said on Tuesday, although it received permission this month to plug an old well.

The London-based company said it hoped to restart drilling by the end of the year, but added it was still working to improve drilling procedures before making applications.

"We are making sure we have our standards in place for us to go forward," Chief Executive Bob Dudley told analysts Tuesday on a conference call.

Peter Hutton, analyst at RBC Capital Markets, noted on a call between analysts and management: "So far this year, Shell have had 16 (drilling permits approved), Chevron have had 23, BHP have had 15, Exxon has had 11 and BP has had nil."

President Barack Obama banned oil and gas drilling from late May to mid-October last year after BP's deepwater Macondo well ruptured and spewed more than 4 million barrels of oil into the basin. The gusher followed a blast on the Deepwater Horizon oil rig, in which 11 workers died.

U.S. regulators did not begin approving permits until late February, after industry consortiums had established rapid-response systems to contain and control a Macondo-like spill.

BP, the largest oil producer in the Gulf, has received one permit so far this year. It allows the company to plug and abandon a well it had drilled before the spill.

Dudley said BP's oil output in the Gulf is now 250,000 barrels a day. That's down from 400,000 barrels a day pre-Macondo.

BP's loss of high margin barrels from the Gulf of Mexico contributed to lower than expected second quarter earnings on Tuesday.

Executives said BP aims to seek permits to drill production wells in its prolific Thunder Horse and Atlantis oil fields, as well as new exploration and appraisal wells.

"We'll be aggressively applying for permits there in the Gulf," Dudley said.

He said the U.S. Bureau of Ocean Energy Management, which regulates Gulf oil and gas activity, has "made it clear" that the agency is not holding BP to a higher standard than other Gulf producers. He insisted BP has set higher standards for itself, and will return to the Gulf intent on working with less risk.

Head of new projects Bernard Looney said the company would likely start by completing wells which were suspended by the moratorium rather than spudding new wells.

(Editing by David Gregorio)

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