US ends deepwater drilling ban

Last updated 08:05 13/10/2010

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The Obama administration on Tuesday lifted its ban on deepwater drilling seven weeks ahead of schedule, saying newly imposed rules significantly reduce the risk of a repeat of the BP Gulf oil spill, the country's worst ever.

Restarting deepwater drilling could be slow, however, as oil companies will need to comply with the new regulatory regime and demonstrate they can adequately respond to major blowouts before drilling can resume, the department said.

"The oil and gas industry will be operating under tighter rules, stronger oversight, and in a regulatory environment that will remain dynamic as we continue to build on the reforms we have already implemented," Interior Secretary Ken Salazar said in a statement.

The Obama administration is lifting the controversial drilling ban as his Democrats prepare for a tough mid-term election fight in November, amid concerns over the economy and unemployment.

The drilling ban drew sharp protests from Gulf state lawmakers and a court challenge from companies who complained the ban cost jobs and stalled an industry with a relatively good record.

While the reopening of the prized deep Gulf of Mexico waters will be good news for drillers like Transocean Ltd and explorers like Royal Dutch Shell, analysts warn it will take months or years to return to the pace of activity prior to the Macondo disaster on April 20.

Shares of drilling contractors were buoyed by the news, however. Transocean shares traded in the United States climbed 4 percent to US$64.42, while shares of Diamond Offshore climbed nearly 3 percent to US$68.48 in afternoon trading on the New York Stock Exchange.

New procedures and more rigorous controls laid down by the Interior Department will increase costs and slow development of a promising region expected to help boost US domestic oil production.

Shallow water drillers, who were not subject to the drilling ban, have complained that lengthy delays in permitting since the BP spill amount to a de facto moratorium on all drilling.

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- Reuters

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