BP’s discovery of the biggest US oil find in three years may spur an exploration revival in the Gulf of Mexico, a region thought by some industry executives to be played out after output slumped.
London-based BP said overnight it identified a “giant” prospect called Tiber more than 9.7 kilometers beneath the surface of the Gulf.
The find confirms there are more large reservoirs of crude off the coasts of Louisiana and Texas, said Matt Snyder, lead analyst for Gulf of Mexico research at consulting firm Wood Mackenzie in Houston.
“This is definitely good news for the Gulf,” Snyder said. “When a supermajor like BP uses a term like ‘giant’ to describe a discovery, people sit up and take notice.”
The announcement brings new attention to a region where offshore oil exploration was pioneered more than six decades ago. The former Kerr-McGee Corp. drilled the world’s first commercial oil well out of sight of land in the Gulf of Mexico. It struck crude in October 1947, Daniel Yergin, chairman of IHS Cambridge Energy Research Associates, wrote in “The Prize,” his book on the industry’s history.
The region has lost favour among some producers. Exxon Mobil, the biggest US oil company, hasn’t emphasised Gulf of Mexico exploration because most discoveries haven’t been large enough to justify the expense, chief executive Rex Tillerson told reporters in March 2008.
BP, whose partners at Tiber are Petrobras and ConocoPhillips, said its discovery may hold 3 billion barrels of crude and natural gas. Of that total, the companies may be able to extract the equivalent of 450 million barrels of oil, said Leta Smith, a director at IHS Cambridge in Houston. At current prices, that amount of oil would be worth more than $30 billion.
Tiber is BP’s second discovery in three years in a geological formation in the Gulf known as the lower Tertiary, which consists of a layer of rocks created 24 million to 65 million years ago. It’s the 18th discovery to date in the lower Tertiary, which is deeper than any existing producing fields.
BP chief executive Tony Hayward is spending $US115 million a week in the US to find new prospects and boost output. Before Tiber begins pumping oil, Hayward’s scientists must figure out how to coax crude from delicate seams of stone where temperatures can exceed 121 Celsius, said Smith, a former Amoco geologist.
Six miles below seabed
Tiber was drilled 250 miles south-east of Houston in 4,132 feet (1,259 meters) of water, reaching almost 31,000 feet beneath the seafloor. The total length of the drill stem from the floor of the rig to the terminus of the well was more than a mile longer than Mount Everest is high.
BP, which operates Tiber and owns a 62 per cent stake, plans more wells to assess the expanse and characteristics of the field, according to a company statement. BP said it doesn’t yet know if Tiber will prove commercially viable.
If future tests confirm the field holds the equivalent of 450 million barrels of recoverable oil and gas, Tiber will be the largest US find since at least August 2006, when BP discovered Kaskida, another lower Tertiary prospect.
“This proves it’s a very prolific trend,” said Chris Ross, a vice president specialising in oil at consulting firm Charles River Associates in Houston. “That’s good news for people with leases and good news for the US.”
Chevron’s Jack
Geologists and engineers didn’t know if oil that far beneath the seafloor could be tapped until 2006, when Chevron Corp. completed the first successful test well at those depths.
The well, drilled into Chevron’s Jack prospect about 175 miles southwest of the Louisiana coast, showed that energy companies could keep a hole open down to 60 million-year-old rocks amid shifting layers of salt and blistering temperatures.
Other discoveries in the same formation as Tiber and Jack include Buckskin, which Chevron announced in February, as well as Great White, Silvertip and Tobago, which comprise the Royal Dutch Shell-led Perdido project scheduled to commence production next year. BP and Chevron also own stakes in Perdido.
“The question is what is the quality of the reservoir, what is the quality of the oil, whether it will flow and what will be the cost of getting it out,” said Ross, a former BP chemist. “A lot of technology has yet to be developed that will be necessary to exploit this discovery.”
Gulf output slows
Oil production in federal waters of the US Gulf fell 9.8 per cent last year to 1.15 million barrels a day, the lowest since 1997, as new finds failed to keep pace with declining output from fields discovered in the 1970s and 1980s. Production in the region peaked in 2003 at 1.56 million barrels a day, according to the Energy Department in Washington.
Even before announcing the results of the Tiber well, BP was laying the groundwork to expand its search for crude in the Gulf. The company was the high bidder last month in a US government auction of leases on a pair of blocks in Keathley Canyon, the same area that includes Tiber, according to the federal Minerals Management Service.
