Major Oil Discovery in the GOM...

6SpeedTA95 · 09-05-2006, 11:28 PM

CNN.com - Gulf oil discovery may be bigger than Alaska's Prudhoe Bay - Sep 5, 2006

WASHINGTON (AP) -- Move over, Alaska. Geoscientists have made what may be the nation's largest oil discovery off the coasts of Louisiana and Texas.

It could be the biggest domestic oil find in 38 years, but production is years away, and even then it won't reverse America's growing reliance on imports or have any meaningful effect at the gasoline pump.

A group led by Chevron Corp. has tapped a petroleum pool 270 miles south of New Orleans -- and almost 4 miles beneath the ocean floor -- in a region that could hold as much as 15 billion barrels of oil, or more than Alaska's Prudhoe Bay.

"It confirms a new frontier, a new horizon in the ultra-deep water," said Daniel Yergin, chairman of Cambridge Energy Research Associates and author of "The Prize," the Pulitzer Prize-winning history of the oil industry. "It isn't energy independence," he added.

Nevertheless, the announcement of a test well that sustained a flow rate of more than 6,000 barrels a day is a boon to Western oil companies. It comes at a time when they are finding it harder and more expensive to gain access to oil-producing countries such as Russia and Venezuela, and when foreign supplies are increasingly at risk because of political unrest across Africa and the Middle East.

The proximity of the Gulf of Mexico to the world's largest oil-consuming nation makes the discovery extra attractive to the industry. However, analysts said the find could bring pressure on Florida and other states to relax limits they have placed on drilling in their offshore waters for environmental and tourism reasons.

Chevron estimated that the 300-square-mile region known as the lower tertiary, a rock formation that is 24 million to 65 million years old, contains between 3 billion and 15 billion barrels. The upper end of that range would be enough oil to expand the country's reserves by 50 percent. But the first drop of oil from the lower tertiary isn't expected to hit the market until at least 2010, and at best it will only slow the decline in annual U.S. production.

Some analysts urged caution in inferring too much, too soon.

"One well doesn't tell you a lot of information," said Matthew Simmons, a Houston investment banker and author of "Twilight in the Desert: the Coming Saudi Oil Shock and the Global Economy."

At its height in 1988, the Prudhoe Bay field produced an average of 1.6 million barrels a day; in 2005, it yielded less than 400,000 barrels a day. (An Alaska wildlife refuge the industry has sought to drill is believed to contain some 10 billion barrels.)

Output from the lower tertiary could eventually reach 750,000 barrels a day, or more, analysts said, but it won't significantly dent the country's energy imbalance.

"It's a nice positive, but the U.S. still has a big difference between its consumption and indigenous production," said Art Smith, chief executive of energy consultant John S. Herold. "We'll still be importing more than 50 percent of our oil needs."

Challenges acknowledged
While the industry was mostly upbeat about the potential of this new discovery, it also acknowledged some challenges, including a dearth of rigs capable of drilling in such deep water and the long lead times required to drill and complete deep-water wells.

The U.S. consumes roughly 5.7 billion barrels of crude-oil in a year, while its reserves currently exceed 29 billion barrels, according to the U.S. Energy Department. To put that into perspective, Saudi Arabia's reserves are believed to exceed 250 billion barrels.

Chevron's test well, called "Jack 2," was drilled in about 7,000 feet of water. Chevron has a 50 percent stake in the field, while partners Statoil ASA of Norway and Devon Energy Corp. of Oklahoma City, Oklahoma, own 25 percent each.

The financial implications of Jack 2 and other prospects in the lower tertiary are most significant for independent oil and gas producer Devon, which is the smallest of the three partners. Devon's shares soared about 15 percent on the New York Stock Exchange.

"Relative to its size, Devon has one of the greatest exposures to the deepwater Gulf of Mexico," said Oppenheimer & Co. analyst Fadel Gheit.

That said, many companies, including BP PLC, Exxon Mobil Corp. and Anadarko Petroleum Corp., stand to benefit from their own projects in the lower tertiary. "If the current thinking is correct, this is only a beginning," Gheit said.

The well was drilled in the Walker Ridge area of the Gulf, 175 miles off the coast of Louisiana. It is an area the industry has been exploring for about five years.

San Ramon, California-based Chevron said the well set a variety of records, including the deepest well successfully tested in the Gulf of Mexico. Chevron said the well was drilled more than 20,000 feet under the sea floor.

Not using the quotes...

This just goes to show that there's still relatively large discoveries out there and we dont know how big this really is. Furthermore deep water production and capability is really in its infancy. There's billions if not trillions of barrels of oil probalby in fairly easy spots to get to. The question now is finding them.

This is good news on the energy front and hopefully will spur ocean development of energy supplies.

Donkey® · 09-05-2006, 11:35 PM

Yep. More oil is what we need. That's the fix.

Ardentfrost · 09-05-2006, 11:37 PM

As long as it lowers gas prices

ballz2wallz · 09-05-2006, 11:42 PM

Originally Posted by Donkey®

Yep. More oil is what we need. That's the fix.

i doubt they'll discontinue research on alternative fuels because of it. it just means that we won't be hurting at the pumps while they're finding that alternative

Donkey® · 09-05-2006, 11:44 PM

Originally Posted by ballz2wallz

i doubt they'll discontinue research on alternative fuels because of it. it just means that we won't be hurting at the pumps while they're finding that alternative

"At best we're not going to see a drop of oil for five years, maybe seven years," said Fadel Gheit, oil analyst for Oppenheimer. "It's great news for Chevron and even more so for Devon. But you can't hold your breath waiting for it."

Chevron test in deep Gulf could swell U.S. oil reserves - Sep. 5, 2006

6SpeedTA95 · 09-06-2006, 12:10 AM

They're saying this well could be 10 or 15 billion barrels. Current proven reserves for the US are about 22 billion barrels. Whats not told there is all the estimate reserves that we have but do not have access too due to governmental regulation. It'd be nice to do exploration just for reserve reasons I'd think. Perhaps this new discovery will help push our curiosity.

6SpeedTA95 · 09-06-2006, 12:14 AM

Originally Posted by Donkey®

"At best we're not going to see a drop of oil for five years, maybe seven years," said Fadel Gheit, oil analyst for Oppenheimer. "It's great news for Chevron and even more so for Devon. But you can't hold your breath waiting for it."

Chevron test in deep Gulf could swell U.S. oil reserves - Sep. 5, 2006

The Jack 2 well, which is 175 miles offshore, is in more than 7,000 feet of water and then drilled through more than 20,000 feet of rock below the sea floor, or about five miles below the surface of the Gulf. Chevron said the test had a flow rate of more than 6,000 barrels of crude oil a day.

Chevron would not estimate how much its reserves would be increased as a result of the test, nor would Devon. But Chevron said that it now believes the lower tertiary region of the Gulf could hold reserves of 3 billion to 15 billion barrels of oil. Total established U.S. reserves are estimated at less than 30 billion barrels.

I found that to be a great snippet from that article. Think about that...7000 feet of water and then 20,000 feet of bedrock, you're talkin five miles down

We could have another major hit like we did in the early days of oil exploration. We're beginning to crack the water egg now and there were numerous large discoveries in the 1920s to 1940s and i suspect the next 30 years could show the same thing for ocean reserves.

imind · 09-06-2006, 12:30 AM

so we take out all of the oil holding the ground up. what happens when that ground collapses?

seriously, how much money are oil companies spending on oil exploration versus alternative fuels? of course, they can spend their money on whatever they want, but why wouldn't they invest more in alternative fuels versus exploration? is there really any question as to where the 'good money' lies?

Nonphixion · 09-06-2006, 02:30 AM

Originally Posted by imind

so we take out all of the oil holding the ground up. what happens when that ground collapses?

seriously, how much money are oil companies spending on oil exploration versus alternative fuels? of course, they can spend their money on whatever they want, but why wouldn't they invest more in alternative fuels versus exploration? is there really any question as to where the 'good money' lies?

Indeed.

More fossils are by no means the answer.

ballz2wallz · 09-06-2006, 07:43 AM

Originally Posted by imind

so we take out all of the oil holding the ground up. what happens when that ground collapses?

seriously, how much money are oil companies spending on oil exploration versus alternative fuels? of course, they can spend their money on whatever they want, but why wouldn't they invest more in alternative fuels versus exploration? is there really any question as to where the 'good money' lies?

there's a more immediate profit on oil. alternative fuels are still in the R&D

Stylerod · 09-06-2006, 09:00 AM

Originally Posted by Donkey®

Yep. More oil is what we need. That's the fix.

No, it's oil from a different place than the ME. By the time this oil is ready to go I'm hoping most cars offered are at least hybrids. Maybe we will also have a new nuclear power plant or two in the next 10 years as well.

Less need for oil + more self sufficiant oil production = Good news all around.

Quit being so cynical. This isn't a "bad" thing.

6SpeedTA95 · 09-06-2006, 09:55 AM

Originally Posted by Stylerod

No, it's oil from a different place than the ME. By the time this oil is ready to go I'm hoping most cars offered are at least hybrids. Maybe we will also have a new nuclear power plant or two in the next 10 years as well.

Less need for oil + more self sufficiant oil production = Good news all around.

Quit being so cynical. This isn't a "bad" thing.

Thats correct...oil should be used as a supplment in the car market and should not be used for power generation at all.