April 2018

Drilling advances

Home cooking.
Jim Redden / Contributing Editor

In U.S. sports lingo, when the on-field officials are perceived as giving preferential treatment to the home team they are said to be serving up some “home cooking.” After eight years of what they described as overreaching rules enforcement, players in the Gulf of Mexico believe they, too, are finally performing on a level playing field. 

A month shy from a year on the job as director of the U.S. Bureau of Safety and Environmental Enforcement (BSEE), Louisiana’s own Scott Angelle brings a receptive, and knowledgeable, ear to operators’ technical issues, amid an accelerated drive to enact regulatory reform throughout the offshore sector. “There’s a renewed sense of optimism. It was great news for us to finally have someone at the helm of BSEE, who knows oil and gas, understands the industry, the in’s and out’s of a drill bit and what it takes to have a robust offshore oil and gas industry,” said Lori LeBlanc, executive director of the grassroots Gulf Economic Survival Team (GEST), based in Thibodaux, La.

As the former secretary of the Louisiana Department of Natural Resources (DNR), Angelle actually played an influential role in the creation of GEST in 2010, originally as a vehicle for opposing the offshore moratorium imposed by then-President Barrack Obama in response to the Deepwater Horizon tragedy. Since then, GEST’s marching orders have been to help lead the industry opposition to the stream of onerous regulations that followed the lifting of the moratorium. 

“We spent eight years fighting regulation after regulation, and now we’re like the dog that has finally caught its tail. Now, we have to figure out how we reshape regulations in a way that makes sense for the industry,” said LeBlanc, who also serves as the Offshore Committee director for the Louisiana Mid-Continent Oil & Gas Association.

Revamped rule in making. Thanks largely to the regulation-dyspathetic Trump administration, coupled with Angelle in charge of BSEE, LeBlanc said the industry is finally making headway in revamping the previous regime’s heavily derided deepwater well control rule. With what has been described as overly prescriptive drilling margins and other stipulations, the well control rule, and the similarly oppressive production safety rule, were seen as putting the already distressed Gulf of Mexico at an even greater economic disadvantage. 

“The third-party verification rule, real-time monitoring, and so forth were issues where the industry felt the economic analysis, as published, was very much flawed,” LeBlanc said. “The cost of complying with these provisions, vs. the safety benefits we were going to get out of them, just didn’t measure up.” 

After Angelle’s appointment, BSEE held a workshop in Houston, where industry representatives submitted the technical problems that they had with the well control rule, as enacted. The industry’s comments were submitted as part of a re-proposal package, which in keeping with the federal government’s cumbersome process, was sent to the Office of Management and Budget (OMB) on Dec. 7 for up to a 90-day review period. The reviewed version will be returned to BSEE for tweaking, if necessary, before being formally published in the Federal Register for public comment, after which a revised rule will be put into effect. If all goes well, LeBlanc said a more acceptable well control rule conceivably could be enacted by the third quarter. 

During the past presidential administration, where regulatory reform was not a high priority, OMB review was a faster process, LeBlanc said. “Many OMB reviews had taken between 30 and 60 days, but I have to believe their pile of (re-proposed) regulations coming in has increased because of the president’s executive orders.” 

Also, unlike the previous offshore referee, the current BSEE chief is amenable to giving the industry more time to evaluate the ramifications of an existing or proposed regulation. “With the production safety rule, industry requested an extension, which was quickly granted,” she said. 

Relaxing regulatory oversight, however, does not translate into relaxed enforcement of established safety standards. Effective April 1, BSEE says its inspectors will spend more time on rigs and platforms, while saving nearly $20 million over 3.5 yrs. Exploiting technology to access and evaluate electronic records onshore, for instance, will allow for longer and more efficient inspections and, in the process, reduce helicopter and related expenses, BSEE says. 

Boost for jackups? Meanwhile, the derivatives of a supportive government were illustrated, in part, with the March 21 regionwide Gulf of Mexico lease sale, billed as the largest in U.S. history. While generally tepid, the sale attracted considerably more bids for federally controlled shelf blocks than the previous offering. The heightened interest was attributed to the Bureau of Ocean Energy Management’s (BOEM, a BSEE sister agency), lowering of royalty rates from 18.75% to 12.5% last year for waters shallower than 657 ft. If the shallow-water bids inspired by the lower rates ultimately succeed in taking the shelf off life support, some of the still-operable jackups stacked along the Gulf Coast could find a working home. 

A similar reduction in royalties is reportedly under consideration for deeper waters, which could generate a higher response in future regionwide lease offerings. Lease sale 250 attracted just under $124.8 million in high bids for 148 tracts covering 815,403 acres in the western, central and eastern Gulf, in water depths ranging from nine to more than 11,115 ft. “The total of high bids represents a modest increase of about $3 million over last year’s August regionwide Lease Sale 249, but is still a lackluster result,” says Wood Mackenzie. wo-box_blue.gif

About the Authors
Jim Redden
Contributing Editor
Jim Redden is a Houston-based consultant and a journalism graduate of Marshall University, has more than 40 years of experience as a writer, editor and corporate communicator, primarily on the upstream oil and gas industry.
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