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Gulf of Mexico Log Jam Breaks
The government has started to issue a trickle of drilling permits for the deepwater Gulf of Mexico, as the log jam created by last year's oil spill starts to break up. This exploration and development is needed to offset declines in domestic production in other areas and reduce overall dependence on foreign source of energy.
TUTORIAL: Commodity Investing 101
The Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) imposed a moratorium on deepwater drilling after the oil spill by BP (NYSE:BP) in early 2010. After much legal wrangling between the industry and the government, that moratorium was eventually removed.
A study released by the Congressional Research Service in late 2010 reported that the Gulf of Mexico contained "undiscovered technically recoverable resources" of 44.9 billion barrels of oil, and 232.5 trillion cubic feet of natural gas. This is the most reserves in any offshore area of the United States.
The Players
In February 2011, Noble Energy (NYSE:NBL) received the first permit from the government, and is being allowed to finish drilling the Santiago prospect located on Mississippi Canyon Block 519.
Noble Energy has a 37.5% working interest in this well, and was in the midst of drilling it when the moratorium was imposed last year. The company already has two successful wells here, as part of the Galapagos project, and hopes the Santiago exploration well will be successful as well. BP also owns part of the Santiago well, along with two private oil and gas companies.
BHP Billiton (NYSE:BHP) received a permit to continue drilling at the Shenzi oil field. The company has been working at this field for the last decade, and started up production form here in March 2009.
ATP Oil and Gas (Nasdaq:ATPG) received a permit to finish a well located approximately 90 miles offshore in Mississippi Canyon Block 941. The well was originally drilled in 2009, and the company was just about to finish the well when the moratorium was imposed. The well is being drilled at the Telemark Hub, where ATP Oil and Gas already has two producing wells. The company is also trying to get a permit for a fourth well at this site, and hopes to drill this well sometime in 2011.
Royal Dutch Shell (NYSE:RDS.A) received approval by the government for a supplemental exploration plan at the company's Auger field. The company updated the original plan that was approved in the mid 1980's and plans to drill three exploratory wells at this field.
Other permits to drill in the Gulf of Mexico were issued to Chevron (NYSE:CVX), which received one for a well located on Keathley Canyon Block 736, and Exxon Mobil (NYSE:XOM) was permitted to drill a well on Keathley Canyon Block 919.
The Bottom Line
Exploration and development of the vast resources of the Gulf of Mexico is starting up again after a year long interruption due to the oil spill in early 2010. This industry effort is critical, and will eventually add to our domestic production and reserves base. (Unit investment trusts provide direct exposure to the energy sector, fueling better returns. Check out Investing In Oil And Gas UITs.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
TUTORIAL: Commodity Investing 101
The Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) imposed a moratorium on deepwater drilling after the oil spill by BP (NYSE:BP) in early 2010. After much legal wrangling between the industry and the government, that moratorium was eventually removed.
A study released by the Congressional Research Service in late 2010 reported that the Gulf of Mexico contained "undiscovered technically recoverable resources" of 44.9 billion barrels of oil, and 232.5 trillion cubic feet of natural gas. This is the most reserves in any offshore area of the United States.
The Players
In February 2011, Noble Energy (NYSE:NBL) received the first permit from the government, and is being allowed to finish drilling the Santiago prospect located on Mississippi Canyon Block 519.
Noble Energy has a 37.5% working interest in this well, and was in the midst of drilling it when the moratorium was imposed last year. The company already has two successful wells here, as part of the Galapagos project, and hopes the Santiago exploration well will be successful as well. BP also owns part of the Santiago well, along with two private oil and gas companies.
ATP Oil and Gas (Nasdaq:ATPG) received a permit to finish a well located approximately 90 miles offshore in Mississippi Canyon Block 941. The well was originally drilled in 2009, and the company was just about to finish the well when the moratorium was imposed. The well is being drilled at the Telemark Hub, where ATP Oil and Gas already has two producing wells. The company is also trying to get a permit for a fourth well at this site, and hopes to drill this well sometime in 2011.
Royal Dutch Shell (NYSE:RDS.A) received approval by the government for a supplemental exploration plan at the company's Auger field. The company updated the original plan that was approved in the mid 1980's and plans to drill three exploratory wells at this field.
Other permits to drill in the Gulf of Mexico were issued to Chevron (NYSE:CVX), which received one for a well located on Keathley Canyon Block 736, and Exxon Mobil (NYSE:XOM) was permitted to drill a well on Keathley Canyon Block 919.
The Bottom Line
Exploration and development of the vast resources of the Gulf of Mexico is starting up again after a year long interruption due to the oil spill in early 2010. This industry effort is critical, and will eventually add to our domestic production and reserves base. (Unit investment trusts provide direct exposure to the energy sector, fueling better returns. Check out Investing In Oil And Gas UITs.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Eric Fox
Eric J. Fox, CFA, is a freelance financial writer and has previous experience working in the asset management industry as an equity analyst and portfolio manager on the buy side. His favorite area to write on is the energy sector and he keeps current on the industry by reading Haynesville Shale, Permian Oil and Gas and various other blogs.
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