Gulf of Mexico rigs ready to drill, but there's little work

For the 31 workers on this jackup oil rig, the waiting is finally over. In recent weeks, they have been doing basic chores like painting handrails and scrubbing the deck while the federal government reviewed Castex Energy’s application to drill a natural gas well in 150 feet of water in the Gulf of Mexico — a normally quick process that turned glacial after the BP oil spill on April 20 prompted regulators to shut down almost all new drilling in the region.

The usual deafening clatter of the driller shack and engine room on the Seahawk 2007 had been replaced by relative silence. After finishing a shift, the men typically went to their cabins instead of playing poker with their buddies, hitting the weight room or watching football in the television room. With no alcohol on board, many of the men had been eating more, Kenneth Milton, a rig cook, told a visiting reporter. “Everyone’s tensed up, nervous.”

Much of that tension will now ease. On Dec 7, regulators finally granted a drilling permit to Castex, which has a contract with the Seahawk 2007 to drill the well. Over the next few days, the structure will be towed from its current location near Cameron, La, to a drill site off the Texas coast.

“I’m glad they finally stopped dragging their feet,” said Gerald Wayne Blanchard, the top supervisor on the rig. “Now we can get back to work.”

But the long-term prospects for the workers on the Seahawk 2007 — and their employer, Seahawk Drilling — remain in doubt.

The workers still have jobs, but many of them are making significantly less than they did before the BP accident. Seahawk Drilling has suffered so much from the slowdown that it is considering selling some rigs — and maybe the entire company.
“If we get a good offer, we’re on the block,” said Randall Stilley, Seahawk’s president and chief executive.

That is part of the legacy of the BP disaster, which killed 11 people, spilled millions of barrels of oil and shook up a regulatory regime that had for years granted drilling permits without much review.

Sudden rise

Over the past few weeks, about a quarter of the gulf’s 46 shallow water oil rigs were idle, according to Jim Noe, executive director of the Shallow Water Energy Security Coalition and senior vice president at Hercules Offshore. That compares with 5 to 10 per cent in normal times, he said. After a flurry of permits was granted in late September and early October, he said, “we have seen another trickle.”

Although the ban on drilling in the gulf was officially lifted weeks ago, the top regulator for offshore drilling acknowledged last week that permits have been slower in coming as the government stiffened safety requirements and intensified its reviews.

“I feel terrible for the guys on the rig who did nothing wrong,” Michael Bromwich, director of the Bureau of Ocean Energy Management Regulation and Enforcement, said. “They are victims.”

At the same time, Bromwich said, “it would be odd to act as if nothing had happened in April.”

After overhauling its procedures and lifting a six-month-long moratorium, the agency is just now beginning to receive applications for new deepwater wells similar to the BP well. Applications for shallow-water wells, which are considered less risky and were frozen for only a few weeks, have been moving more quickly.

As of Dec 7 morning, regulators said, they had approved 12 of the 23 permit applications submitted since June 8 and eight earlier applications that had been revised to meet tougher standards.

Bromwich said that later this week, his agency would be releasing new guidelines that “we hope will clarify some of the ambiguities, uncertainties that we have heard about.”

Dale Johnson, a roustabout on the Seahawk 2007, is eager to get back to work.
Early this year, Johnson bought the home of his dreams in rural Mississippi: a brick house with a big front porch, a lake view, and shade from pine, oak and dogwood trees.

Weeks later, the BP well blew out. As most drilling in the gulf came to a halt, Seahawk Drilling went into a financial tailspin, and Johnson was demoted from a crane operator position paying $26 an hour to his current role, which pays $17 an hour. Even if drilling restarts, he is unlikely to get his old job, and its higher pay, back soon.

“It was a kick in the stomach,” said Johnson, 44. “I told my wife I feel like a nobody again.”

At Seahawk Drilling, a major shallow-water operator with 20 rigs, only seven rigs have drilling contracts with oil companies. Of those, two are still idle, waiting for their clients to get government permits. Before the BP accident, nine rigs were working, but in the summer, that number fell to as low as two. While things are picking up, top executives say they could be back down to only a handful of working rigs in January if permit approvals do not pick up.

“We’re in permitorium,” said Stilley, Seahawk’s president and chief executive.
Seahawk says each manned rig costs $25,000 a day to operate whether it is earning money or not. All told, the company lost $74 million over the first nine months of the year, and it has laid off 350 of its 900 workers.

Jobs cut

Across the industry, a couple of thousand oil workers have lost their jobs — a lesser toll than once predicted but still painful.

To make matters worse for unemployed shallow-water rig workers, they are ineligible to seek compensation from BP’s two relief funds because they did not technically suffer from the moratorium on deepwater drilling.

“They are in Catch-22,” said Kenneth Feinberg, administrator of the Gulf Coast Claims Facility.

As they looked out from their vessel on Dec 6, the workers on the Seahawk 2007 saw several other mothballed company rigs with skeleton crews aboard parked in a no-man’s-land they call ‘the bone yard’.

The Seahawk 2007, an older rig built in the 1980s, has been underemployed since the BP accident. From April to December, the rig would have normally drilled six new wells, according to Blanchard. But since the spill, it has not drilled any new wells and was permitted only to modify three existing wells.

Things appeared to be looking up in mid-November when the rig was leased by Castex Energy, a small, privately held oil and gas company, as Castex anticipated approval to drill a new gas well. But federal regulators sent back the application several times for a variety of modifications.

Kenneth Cunningham, a 40-year-old derrick man, a senior member of the crew who manages the flow of liquids through the well bore, said that workers have been living day to day.

“It’s misery not knowing what tomorrow brings,” Cunningham said. Now he knows.

But Kurt Hoffman, senior vice president and chief operating officer for Seahawk Drilling, said that the relief might not last.

“I think it’s great, but I don’t see anything sustainable,” he said. “We have just been advised by one of our other rigs that it may be another two weeks before the federal government issues a permit. It’s already been waiting a week and a half. That’s long when you are paying $25,000 a day to keep the rig on standby.”