U.S. energy behemoth Chevron Corp. (CVX) has got the green light for conducting oil and natural gas exploratory drilling in the Gulf of Mexico (GoM). The approval by the U.S. regulators is the first for ‘completely new exploration’ in the region – i.e. tapping a reservoir from which oil or gas has never been produced – since British giant BP plc’s (BP) oil rig disaster in April last year.
As a reminder, on April 20, 2010, offshore driller Transocean Inc’s (RIG) ultra-deepwater Horizon drilling platform, contracted to BP, sank following an explosion while operating in the U.S. GoM off the coast of Louisiana.
The incident killed 11 workers and spewed more than 200 million gallons of crude in what is touted as the worst oil spill in U.S. history. Subsequently, a moratorium was imposed on offshore drilling in the region at water depths of more than 500 feet, which was lifted on October 12, 2010.
Chevron’s exploration plan will see the super major drill a new exploratory deepwater well in 6,750 feet of water in Keathley Canyon Block 736, located 216 miles off the Louisiana coastline.
Chevron began initial drilling on the well in March 2010 but was forced to stop midway (in early June) when the Obama administration imposed a deepwater drilling ban because of the oil spill. The revised permit – the fifth approved by the federal agency since the deepwater Horizon rig explosion but the first that provides for exploratory drilling into a new field – will now allow the company to complete the well in the offshore reservoir.
According to the U.S. Interior Department, which oversees offshore drilling, the project has been given the go-ahead only after the fulfillment of strict safety and environmental requirements for offshore operations that have been imposed in the aftermath of the BP oil spill.
San Ramon, California-based Chevron is the second-largest U.S. oil company by market value after ExxonMobil Corp. (XOM). It is engaged in oil and gas exploration and production, refining and marketing of petroleum products, manufacturing of chemicals and other energy-related businesses.
Chevron shares currently retain a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.
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