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The offshore industry definitely is coming back, which is evident from the number of rigs under contract in the Gulf of Mexico. Recently, there were 73 rigs working, which is 13 more than last year, and that does not include the 30-32 deepwater rigs working, with three or four more arriving next year.

“Rigs are returning to the Gulf of Mexico, yet there are more regulations and more requirements. This does not decrease the number of rigs. It might, however, limit the number of companies. The regulations and requirements, though, are creating more office jobs, which is the good news,” said Claude W. Thorp Sr., vice president, Hamilton Group Engineering in Houston.

Thorp also said some companies might wait to move rigs out until hurricane season is over, so the number is expected to rise this fall. Some companies are not waiting.

Exmar Offshore Co. noted its client LLOG successfully has deployed the FPS OPTI-EX in Mississippi Canyon on the Who Dat development and is making preparations to start production operations.

“2012 is shaping up to be an exciting year for LLOG. The company is in excellent financial condition, and our operational plan includes a full year of production from Who Dat, the startup of two new deepwater development projects, and the resumption of our deepwater exploration program. We expect to more than double production volumes from these developed properties and add significant reserves from our 2012 exploration program,” said Scott Gutterman, president and CEO, LLOG, an exploration company operating in the Gulf of Mexico.

“We are very pleased with the way things are moving forward. Maybe the offshore work is not back fully, but we are getting there quickly. When you go from one project to the next, that is a very good sign. There is a lot happening off shore – much more than last year- all of which is translating into real work. For example, just a few years ago we had less than 20 people in the office. Today, we have over 100,” said David M. Lim, managing director, Exmar Offshore Co. It provides a range of services through the life of projects in engineering, construction and operations of offshore facilities such as drilling rigs, floating production facilities, floating storage operations, and offshore accommodations and service vessels.

With the lull that happened in the industry a few years ago, companies spent time at their drawing boards. Compared to the past five to 10 years, today’s rigs have more technology, are safer, are designed at higher levels in case of hurricanes, and priorities are different. Moreover, the technology, as in some other fields, is not decreasing the number of jobs needed to operate a rig, all of which is regulated.

“We are not focusing on decreasing the number of people who work on the rigs. Instead we are focusing on safety, going deeper, more efficiency and environmental concerns,” Lim said.

The number of people it takes to run a rig may differ with the size of a rig, but the types of positions remain the same, including tool pushers, drillers, roughnecks, mud engineer, derrick hands, geologists, welders, well services, wireline techs, pump operators, pump hangers, offshore engineers, project managers and owner representatives.

There also are many jobs off shore similar to those seen in hotels, such as cooks, laundry and housekeeping personnel.

“Offshore rigs run 24 hours a day, so there usually are two or three shifts each day. Also, because shifts are usually seven days on and seven days off, there are extra shifts to cover for those on leave,” Thorp said.

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Petrobras USA says production has begun at its Chinook oil field in the ultra-deep waters of the Gulf of Mexico.

The company says production started last week in the field using a specialized ship that processes and stores oil and natural gas in place of a production platform. The field is being worked by BW Pioneer, a type of ship known in the oil industry as a floating, production, storage and offloading vessel, or FPSO.

Petrobras relies on FPSOs extensively in Brazilian waters. This kind of oil-and-gas processing ship is used widely around the world for years but only now has made an entry into the Gulf.

The Chinook field is about 155 miles off the Louisiana coast. The field is owned by Petrobras and Total Exploration Production USA Inc.

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In an ironic twist, scientists, fishermen and conservationists are urging that hundreds of dormant oil rigs be left standing in the Gulf of Mexico, arguing that a federal plan to remove them will endanger coral reefs and fish.

While environmentalists might more typically be expected to oppose artificial intrusions in the marine habitat, those seeking a halt to the removal want time to study the impact of rig destruction on the Gulf Coast’s economy and to catalog the species, some rare and endangered, that are clinging to the sunken metal.

“I am not supporting oil rigs. I am supporting fish habitat that just happens to on petroleum platforms,” said Bob Shipp, chairman of the Department of Marine Sciences at the University of South Alabama.

U.S. Department of Interior officials say the federal “idle iron” policy, updated in 2010, makes good sense after storms during the 2005 hurricane season toppled 150 defunct oil rigs, causing considerable damage.

If defunct rigs are toppled by storms, they can break loose and hit other rigs – potentially causing an oil spill – be swept to land and destroy a dock or a bridge, knock into and damage natural reefs and cause problems with ship navigation.

“Cleaning up afterwards is a lot more expensive and inefficient,” said David Smith, spokesman for the department’s Bureau of Safety and Environmental Enforcement.

Federal law has long required the removal of drilling infrastructure no longer in use, but a 2010 agency notice asked operators to detail plans for 650 dormant oil and gas production platforms in the Gulf of Mexico and 3,500 inactive wells.

Companies have to demonstrate the infrastructure will be put to use eventually or offer a plan to move ahead with decommissioning, the agency said.

The structures have attracted as many as 3 acres of coral habitat per rig, and some 30,000 fish live off of each reef, according to Shipp.

“They developed into an oasis for reef fishes,” said Shipp, a member of the Gulf of Mexico Fishery Management Council.

FASTER REMOVAL?

Shipp said the updated “idle iron” policy is driving the destruction of old rigs at the rate of three per week, prompting new concerns about the fate of the wildlife and the thousands of jobs that depend on the reef fish.

Diving, sports fishing, restaurants, charter boats and hotels all thrive on the Gulf of Mexico’s $1 billion fishing industry, according to U.S. Representative Steven Palazzo of Mississippi.

If the rig dismantling continues, Shipp fears as much as a 50 percent decline in fishery production, which he worries would further devastate an area still recovering from the BP oil spill in 2010. “I have never seen rigs come down this fast in 30 years of study,” he said.

The Interior Department disputed claims that there has been a rapid rise in rig removals since 2010, though the department could not provide historical data.

As of late August, some 227 platforms were scheduled to be taken down in the Gulf of Mexico through the end of 2013, with 116 slated for disposal, 35 for reef conversion and 76 still awaiting decommissioning plans, the department said. About 3,000 platforms were in the Gulf as of July.

Still, members of the Coastal Conservation Association have described sailing out to favorite fishing holes only to find dead zones after rig removal, according to Ted Venker, the group’s conservation director.

Trade groups representing oil rig operators have not taken an active stance on the issue. The Independent Petroleum Association of America said it understands environmental concerns but the potential liabilities posed by idle rigs must also be considered.

Republican congressman Palazzo has sponsored a “Rigs to Reefs” bill in the House of Representatives that calls for a moratorium on rig destruction until studies can show the impact on fishing and the economy.

Under the legislation, 50 percent of the removal cost would be put back into maintenance of the structures, such as keeping foghorns and night lights working.

“People come from all over the world to fish our waters, and they spend a lot of money while they are here,” Palazzo said. “We want to protect the oil industry, the ecosystem and our way of life.”

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The nation’s oil and gas hub along the Gulf Coast is slowly coming back to life in the aftermath of Hurricane Isaac.

Offshore oil platforms are beginning to ramp up production as crews are returning. Refineries are beginning to restart units as power is restored and floodwaters are cleared out.

While a substantial amount of oil and gas production remains off line, production is coming back as expected. No major damage to oil platforms or refineries have been reported, and no further storm-related spikes in energy prices are expected.

The Bureau of Safety and Environmental Enforcement said Monday that 800,000 barrels per day of oil production remained offline, 58 percent of Gulf of Mexico production. About 100,000 barrels per day of production was restored between Sunday and Monday.

At the height of the storm 1.3 million barrels per day of oil production was suspended. The U.S. consumes an average of 19 million barrels of petroleum every day.

Companies have been quickly returning workers to platforms. About 12 percent of the region’s platforms were still without staff. Nearly all of the Gulf’s offshore platforms and rigs were evacuated last week.

Nine refineries in the path of Isaac are restarting or operating at reduced rates, according to the Energy Department. One refinery has returned to full operation and one, the Belle Chasse, La., refinery operated by Phillips 66, is still shut down because it is still without power.

The company said Sunday most of the floodwater had been cleared from the refinery and most refinery personnel had returned to work to prepare the plant for re-start when power was restored. On Monday, the company said there was no update to the refinery’s status.

The national average price of gasoline rose 11 cents last week as Isaac threatened the Gulf Coast and then swept ashore with high winds and flooding rains. But by Friday the price had leveled off to just under $3.83 per gallon. Monday, the average price declined — barely — by 0.2 cents, to $3.827 per gallon, according to the Oil Price Information Service, AAA and Wright Express.

That’s the highest ever price for gasoline for Labor Day, though it is 11 cents below this year’s high of $3.94 per gallon, set April 6.

Analysts say that gasoline prices should drift lower in the coming weeks as Gulf coast refineries ramp back up, the summer driving season ends and refiners switch to cheaper winter blends of gasoline.

Refineries in the path of the storm shut down or began operating at lower rates to protect their operations, depriving the market of millions of gallons of gasoline and sending prices higher. Refiners consume enormous amounts of electricity and they generate steam to cook crude oil into gasoline, diesel and jet fuel. If the process is interrupted suddenly by a loss in power or steam, fluids can get trapped in equipment and re-starting the refinery can take many weeks. Instead, operators often choose to slow or shut refineries before a storm hits so they can restart as soon as power is restored.

Onshore pipelines, ports and terminals have re-opened, though some are still operating with restrictions, the Energy Department said. Some sections of Shell’s offshore pipeline network have restarted, and others are expected to restart in the next few days.

Several natural gas pipelines remain shut, along with natural gas processing plants that depend on gas from the pipelines. The Energy Department reported that most operators anticipate gas flows resuming over the next few days.

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Energy companies have reoccupied nearly 400 of the production platforms in the Gulf of Mexico that were abandoned in advance of Hurricane Isaac, a federal agency said Saturday, though offshore oil production still remains almost entirely shut down. Oil and gas workers began retaking the offshore sites Friday and federal officials said that 377 of the 596 productions platforms have some staffing on them, up from just 97. Yet officials estimate that 94 percent of oil production, and about 65 percent of natural gas production in the Gulf of Mexico, remains shut in in the aftermath of the hurricane.

It will take a few days for production to be fully restored, according to energy companies with operations in the gulf.

“Once onsite inspections are complete and facilities deemed safe, they will be restarted, and oil and natural gas production will be recommenced in coming days,” BP said in a news release. The company said initial aerial inspections showed no significant damage.

The network of platforms, pipelines and storage facilities is massive, however, and exploration and production companies cannot recommence full operations until the chain of energy infrastructure is reconnected.

“Apache personnel are returning to the platforms and inspecting facilities,” Bill Mintz, spokesman for Apache Corp., said in an email. “The process of restoring production will take a number of days and will be impacted by the pace of resumption of activities by the pipelines and processing facilities operated by other companies.”

The U.S. Bureau of Safety and Environmental Enforcement said reports on offshore facilities indicated mostly minor damage.

In addition to production platforms, the bureau said, 19 of the Gulf’s 76 drilling rigs are still evacuated, down from 48 as the storm approached.

A surge in gasoline prices accompanied Isaac, although the dramatic increases came to an end Friday as the storm moved farther inland. The national average price for gasoline inched up just 0.3 cents Friday to $3.83 per gallon.

Pump prices for gasoline were on the rise even before Isaac arrived. The average price for a gallon of gas rose about 40 cents from July 1 to mid-August because of refinery problems in the Midwest and West Coast, and sharply higher crude oil prices.

Crude has traded between $94 and $97 per barrel for two weeks, after rising from a low near $77 in late June.

On Friday U.S benchmark crude rose $1.85 to end at $96.47 per barrel after Federal Reserve Chairman Ben Bernanke made clear in a speech that the central bank can do more to revive the U.S. economy. That would drive up demand for energy.

Kevin McGill of The Associated Press wrote this report.

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Hurricane Isaac could have been worse at this hub for boats, rigs and manpower that serve most of the Gulf of Mexico’s oilfield.

The port shut down Monday as a mandatory evacuation was ordered in advance of the storm. Isaac dealt a direct hit to the port early Wednesday, but the facility reopened two days later, emerging with what officials describe as minor damage.

Electricity was still out Sunday, but Director Chett Chiasson said the docks, supply yards and other facilities buzzed with activity.

“Our biggest concern was the possibility of channel restrictions and damages to facilities where we would not be able to operate efficiently,” he said, “but that doesn’t seem to have happened.”

Getting the port running was key to allow Gulf oil production to continue, he said.

As Isaac hit, the Federal Bureau of Safety and Environmental Enforcement estimated that 509 of the 596 oil-production platforms and 50 of the 76 drilling rigs the Gulf had been evacuated. By Sunday, workers remain evacuated from 131 platforms, 22 percent, and 18 rigs, 23 percent. About 71 percent of Gulf oil production and 55 percent of natural-gas production remained halted Sunday.

Through the weekend, massive oceangoing vessels could be seen navigating the port’s channels as gulf oil production resumes.

The port serves as a staging area for half the drilling rigs in the Gulf and production of about 20 percent of the nation’s oil supply, Chiasson said. Supplies, equipment and rig infrastructure are typically brought into the port by truck along La. 1 then loaded onto towering vessels before being transported to the Gulf.

Wind damage was minimal, he said. About a dozen power poles were down this weekend, and work was being powered by generators.

Chiasson said he expects power to be restored sometime early this week. Entergy crews have been moving steadily but had not restored power 20 miles to the north in Golden Meadow as of midday Sunday.

The port did receive some damage from Isaac’s nearly 100 mph winds. Some offices had roof damage, the massive, airplane hanger-like structures where ships are loaded received mostly cosmetic damage, Chiasson said.

But advocates for more federal money to upgrade La. 1, the only land route to and from the port, say Isaac — as hurricanes past — renews concern about the crippling effects a lengthy closure of the road could cause to the nation’s energy supply and economy.

La. 1 Coalition Executive Director Henri Boulet noted that 7.1-mile section of highway between Golden Meadow and Leeville was closed 78 hours as Isaac’s storm surge overtopped it. Last year, a 61-hour closure due to flooding from Tropical Storm Lee also shut down traffic to and from the port.

Sea-level rise, coastal erosion and storms have threatened the road for decades, and one section south of the port remains closed to traffic at night while workers repair Isaac’s damage.

Boulet cited a July 2011 study by the U.S. Department of Homeland Security that concludes a 90-day closure of Port Fourchon because of damage to La. 1 could result in a $7.8 billion economic loss nationwide. Domestic oil-and-gas production would also be significantly impacted for 10 years, he said.

“What other 7.1-mile stretch of highway in the nation poses a $7.8 billion vulnerability to national gross domestic product if it is washed out?” Boulet said in a news release. “None.”

Boulet said Isaac again illustrates why Congress should spend the estimated $320 to upgrade the stretch of road to an elevated expressway, money the La. 1 Coalition and others have sought for years.

Chiasson said the port area saw about 7 feet in storm surge, but because the facility sits at a higher elevation than surrounding areas, it sustained only minimal water damage.

The port reinforced many of its aging facilities following 2008’s hurricanes Gustav and Ike, which paid off as workers were able to reopen facilities shortly after Isaac passed.

The port’s northern expansion project received no damage, while the local Caminada Headlands area saw a loss of about 30 yards of beach, he said.

“It’s great to be back open,” he said. “Our mission, when these storms come in, is always to be closed for as short an amount of time as possible. We strive to do that and were very fortunate.”

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The U.S. Bureau of Safety and Environmental Enforcement on Thursday gave teeth to its policy that its inspectors can issue citations to oilfield service contractors operating offshore as well as the energy companies that control offshore leases.

The agency affirmed in an interim policy document that contractors as well as the oil companies they work for can be issued “incidents of non-compliance” for violating the rules. The factors inspectors must consider are the seriousness of the violation, the harm that resulted, and what control, if any, the contractor had over the situation.

Prior to the 2010 Deepwater Horizon disaster, in which a deepwater well operated by BP PLC (BP, BP.LN) experienced a catastrophic explosion that killed 11 and unleashed a giant oil spill, regulators took a top-down approach to their oversight of offshore drilling, with well operators being held responsible for any violations.

But in 2011, the BSEE issued incidents of noncompliance not just to BP, the operator and lease holder of the ill-fated Macondo well, but also to rig owner Transocean Ltd (RIG) and cementing contractor Halliburton (HAL) for separate violations the agency found contributed to the explosion.

The document released Thursday indicates this will continue to be the agency’s practice. Leaseholders and well operators will continue to be the primary focus of enforcement actions, the BSEE document states, but contractors can be cited “in appropriate circumstances…for serious violations of BSEE regulations.”

Brian Petty, the International Association of Drilling Contractors’ senior vice president for government affairs, said the group is “very nervous” about the impact the agency’s policy could have on contractors’ insurance rates.

He said contracts allow well operators to collect damages from contractors if the latter are found to have been negligent. A government agency stepping into the process upends the system currently in place, and could cause a spike in the insurance rates contractors have to pay, Mr. Petty said.

Analysts say drilling activity in the Gulf of Mexico has returned almost to pre-Deepwater Horizon levels. But Mr. Petty said if the BSEE is aggressive and “cavalier” about enforcement actions against contractors, some might decide it isn’t worth it to drill there.

“At the very least it will be more expensive,” he said, adding that in some cases the additional costs that come with exposure to civil penalties could be a “deal-killer” for drilling contractors.

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The Obama administration ignored the wishes of coastal leaders when assembling a plan for offshore drilling near their shores, says a group of Republican governors from Texas, Louisiana and other states.

In a letter to President Barack Obama late Wednesday and obtained exclusively by Hearst Newspapers, the pro-drilling governors say they are “concerned about the lack of communication from the federal government on critical matters that affect our coastal development.”

In particular, the group complains that the Interior Department did not consult properly with coastal states on its a plan for selling offshore oil and gas drilling leases from 2012-2017 before finalizing the plan in June.

The five-year offshore lease plan focuses on allowing oil and gas development in already-explored areas of the Gulf of Mexico and the Arctic, while ruling out lease sales in Atlantic waters, despite pressure from some Virginia officials eager for exploration off the commonwealth’s shores.

The administration’s program sets up 12 Gulf of Mexico lease sales as well as the possibility of three auctions for rights to drill in waters near Alaska.

The nine governors who wrote Obama on Wednesday under the umbrella of the year-old Outer Continental Shelf Governors Coalition described that drilling plan as anemic.

“The administration fails to expand adequate access to resource-abundant areas in the Arctic and fails to establish leasing in the Mid- and South-Atlantic,” the group said. And Arctic lease sales “may never occur,” the governors said, because the government is requiring further study of that area.

Under the administration’s targeted-leasing approach to Arctic and Alaskan waters, federal regulators will decide what acreage to put on the auction block in a bid to avoid harming wildlife and the indigenous communities that depend on whaling and fishing for food.

The governors also criticized the administration for closing the door to eventually allowing more than 12 auctions in the Gulf of Mexico, even though several sales were delayed after the 2010 oil spill. Gulf Coast states claim a share of federal royalty revenue for oil and gas produced near their shores.

Signers were Govs. Rick Perry of Texas, Sean Parnell of Alaska, Bobby Jindal of Louisiana, Phil Bryant of Mississippi, Robert Bentley of Alabama, Nikki Haley of South Carolina, and Robert McDonnell of Virginia.

Interior Department spokeswoman Kate Kelly rejected the governors’ complaint about poor consultation.

“In developing the five-year program, Interior conducted outreach and sought input from all 50 states, tribes and other stakeholders,” Kelly said. “Through multiple venues, including formal comment periods and public hearings, states provided feedback that helped inform the final plan.”

Tommy Beaudreau, the head of the Bureau of Ocean Energy Management that assembled the leasing program, told Congress in May that his agency conducted public hearings in Gulf Coast states, Washington, and across Alaska’s North Slope and considered more than 280,000 public comments in crafting the final sale schedule.

Federal officials first began seeking public input on the five-year program with a formal request for information in August 2008.

Beaudreau also has defended the administration’s targeted-leasing plan for Arctic and Alaskan waters as an approach that takes local communities’ needs — as well as other factors — into account.

The Outer Continental Shelf Lands Act, which governs oil and gas leasing in federal waters, requires the government to consult with coastal states and localities while developing leasing programs.

The coastal governors coalition said it still is waiting for a response to a letter it sent the White House in March asking for a dialogue about offshore development.

“For five months, this administration has ignored our outreach attempting to improve the state-federal dialogue,” said Perry spokeswoman Allison Castle.

Randall Luthi, the president of the National Ocean Industries Association, said the governors were “wise to point out the flaws” in the administration’s “deeply disappointing five-year plan.”

A government advisory committee comprising state and local government leaders, which for more than three decades counseled the Interior Department on offshore leasing, exploration and development, was disbanded in 2010.

The House of Representatives voted last month to reject the administration’s five-year drilling plan and replace it with a more aggressive leasing plan backed by GOP leaders, which would schedule 29 auctions over the next five years. A bipartisan coalition in the Senate also is advancing an expanded leasing plan.

But any move to toss out the Obama administration’s five-year offshore program would halt pending lease sales, including a Nov. 28 auction of drilling rights in the western Gulf of Mexico. It almost certainly would trigger a new round of environmental studies of any new sale schedule that could take more than a year to complete.

Coastal governors’ letter to Obama on 5-year OCS plan

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