U.S. will announce new drilling moratorium soon

MALIBU, California (Reuters) - The Obama administration promised on Friday it would announce a new deepwater oil drilling moratorium shortly, and a U.S. company became the first to pull a rig out of the Gulf of Mexico because of uncertainty surrounding the ban.

Diamond Offshore Drilling said it was moving its Ocean Endeavor rig to Egypt from the Gulf, where deepwater drilling has been halted because of the 81-day-old BP Plc oil spill.

A federal court in New Orleans on Thursday refused to reinstate the six-month ban on drilling below 500 feet, which the Obama administration imposed after BP's Macondo undersea well blew out on April 20.

But uncertainty over the situation -- and the administration's plans to impose a new moratorium while it investigates the causes of the explosion that triggered the well blowout -- are keeping the drilling rigs shut.

"In the next several days we'll be making an announcement about keeping the moratorium in place," Interior Secretary Ken Salazar said at a department event in California.

"It will be a new moratorium," he said, saying he felt the temporary drilling ban was essential.

The U.S. Court of Appeals for the Fifth Circuit ruled 2-1 against the administration's request to stay a lower court decision lifting the ban, saying the government failed to show how it would be irreparably harmed if it were not granted.

The administration said it did not consider the ban a major setback because it lets Interior apply to stop a project if an operator attempts to start deepwater drilling in the Gulf.

"Our view on the moratorium is that it was right when it was issued and it's right today," Salazar said.

But companies view the ban as too broad and an unwarranted intrusion into their business that cuts into their profits and costs jobs as rigs are idled or, like Diamond's, moved from U.S. waters.

The drilling industry and many U.S. lawmakers have been warning that the policy could lead to an exodus of rigs, and with them thousands of jobs.

ENVIRONMENTAL DISASTER

The flow of oil from the blown-out well is killing birds, sea turtles and dolphins, imperiling multibillion-dollar fishing and tourist industries, and soiling the shores of all five U.S. Gulf Coast states.

It has taken its place firmly atop President Barack Obama's domestic agenda, and complicated the U.S. relationship with close ally Britain, while subjecting Obama to fierce criticism that his handling of the disaster has been too slow and too easy on the British oil giant.

The massive environmental disaster has also sapped the administration's energy as it grapples with high unemployment and tries to pass major legislation like financial regulatory reform months before elections in November in which Obama's Democrats could lose their majorities in Congress.

Thursday's court ruling pushed shares of Transocean Ltd, the world's largest offshore drilling contractor, up more than 5 percent on the Zurich exchange on Friday. They had lost almost half their value since April.

Transocean owns the BP-leased rig that exploded.

But BP, which has seen its share price plummet by about half during the crisis, was off about 1 percent, after rallying to gain about 25 percent from a low over the past two weeks.

Investors had been cheered by reports that BP was seeking new investors and optimism that the worst of the spill might be over, amid talk of progress on a relief well considered the best chance to finally stop the oil flow.

But the shares were hit on Friday by concern about the expected new moratorium and talk that the relief well was not as advanced as some observers had hoped.

"Some of the weakness you're seeing, in addition to the thought of the new moratorium, is the fact that the relief well is further out than people had anticipated," said Gary Bradshaw, portfolio manager at Hodges Capital Management in Dallas.

Shares in Diamond and fellow drilling company Hornbeck Offshore Services Inc were also down.

Hoping to capitalize on an expected stretch of good weather, Washington is pressing BP to begin a switch to a bigger, more storm-proof containment cap at the sea floor that would capture up to 80,000 barrels (3,360,000 gallons/12,700,00 liters) of oil a day, versus 25,000 barrels currently.

However, BP must remove the existing cap, which will lead to an unchecked gusher of oil into the Gulf until a new one is in place, retired Coast Guard Admiral Thad Allen said. About 15,000 barrels per day could gush into the sea.

Allen, who oversees the U.S. response to the spill, said the new cap could be installed by late Sunday or early Monday.

(Additional reporting by Silke Koltrowitz in Zurich, Leah Schnurr in New York, Braden Reddell in San Francisco, Ayesha Rascoe and Steve Holland in Washington; Writing by Patricia Zengerle; Editing by Kristin Roberts and Eric Beech)