Friday September 08, 2006

Major U.S. oil discovery in Gulf of Mexico

iht.com, latimes.com, peakoil.com :

An announcement by three oil companies of a successful production test in the Gulf of Mexico, potentially the largest American oil find in a generation, was seen by experts as ushering in a new era in ultra deep-water offshore drilling. Chevron reported that the successful test on the Jack No.2 well, 270 miles southwest of New Orleans, broke a company record for the deepest successful well test. It has sustained a daily flow of more than 6,000 barrels, a quantity thought to mean considerable reserves. While it is too early to know exactly how big the fields are, the oil companies expressed hope that they might exceed those at Prudhoe Bay, off the northern coast of Alaska.

Chevron, whose partners include Devon Energy and Norway's Statoil, wouldn't quantify the size of its find, except to note that the gulf's deep waters could hold 3 billion to 15 billion barrels of oil - at the high end, a more than 50% boost to U.S. petroleum reserves of 29 billion barrels. It comes as the output of oil and gas from shallower wells in the Gulf of Mexico, containing about one-quarter of American oil reserves, are ebbing and as environmental resistance to offshore drilling in areas closer to coastlines remains strong.

Motorists, however, should hang on to their hybrids. Although the discovery suggests that the undersea region holds more oil than previously thought, experts say the crude will be expensive to extract and years in coming. What's more, growing demand in the U.S. and elsewhere could quickly eat up the production gains. "It's phenomenal, if it's there," said Matthew Simmons, who heads Simmons & Co., a Houston investment bank that specializes in energy. "But until you get a field on production, you don't really know what's there ... it's a roll of the dice." Simmons said the gulf had yielded several highly touted oil finds over the years that fell short of expectations. In addition, there is a shortage of rigs able to drill in deep water, another constraint in exploiting the find quickly.

The deep waters of the Gulf may represent the last area in the United States where large oil and gas reserves remain to be discovered, although some experts see the potential for big discoveries deep off the Atlantic and Pacific coasts, which would require congressional action to exploit. The oil in the area is considered top quality, light and sweet, unlike the oil in many new fields around the world that is heavier and more difficult to process.

(2006-09-08 14:54:25 SGT) [Energy] Permalink

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