Murphy Oil Corp. and Diamond Offshore Drilling Inc. announced a decision late Monday to suspend their drilling operations in the Gulf of Mexico and relocate to central Africa.
In a news release after the close of market Monday (July 12), Diamond Offshore said it reached an agreement with Murphy to suspend a Gulf of Mexico contract, and has entered into a new multi-well international commitment to relocate the deepwater drilling rig Ocean Confidence to the Republic of Congo.
“As the uncertainty about continued deepwater drilling in the GOM (Gulf of Mexico) persists, we must consider alternatives that allow our deepwater assets to remain employed," Diamond Offshore President and CEO Larry Dickerson said in a news release. "The contract we suspended with Murphy has been restructured into a one-year commitment in the GOM that is expected to recommence when our customer is satisfied that it can obtain the necessary permits and can meet any new regulatory requirements.”
Diamond and Murphy's decision came on the same day that the Obama administration issued a revised moratorium Monday on deepwater offshore to replace an early ban that U.S. courts cited as "overreaching."
Murphy and other oil industry officials have repeatedly warned that the Obama administration's moratorium on deepwater drilling in the Gulf of Mexico could slow oil and production in the region and shift U.S. jobs overseas.
The first ban was implemented in response to the massive oil spill following the April 20 explosion aboard the Deepwater Horizon drilling rig. London-based BP said recently that it is spending about $100 million a day to clean up the Gulf of Mexico's polluted waters.
Murphy said earlier this summer that it had suspended production in the Deep Blue exploratory well development in the Gulf region until the drilling ban is lifted. The Arkansas oil giant's Gulf of Mexico production is approximately 50 million cubic feet of natural gas and 20,000 barrels of oil per day.
Murphy's new contract with Diamond is a three-well commitment, plus an option for additional work, and includes an obligation for the Murphy to move the rig to and from the Republic of Congo. Diamond said that it's Gulf of Mexico and central Africa drilling pacts with Murphy will add approximately $234 million to the Houston-based driller's bottom line.
The Ocean Confidence is a massive rig that can drill up to 35,000 feet. It was first commissioned in 2001 in a five-year contract with BP.
Ironically, Murphy and Diamond's decision to pull of the Gulf of Mexico, along with the Obama administration's newly-written ban, preempted BP's announcement that it had installed a new tighter-fitting cap on the leaking Deepwater Horizon well.
The British oil giant said it hopes after testing is completed (today) that oil will stop leaking into the Gulf of Mexico.
"It is expected, although cannot be assured, that no oil will be released to the ocean for the duration of the test," BP said. "This will not however be an indication that flow from the wellbore has been permanently stopped.”