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Posted September 06, 2006 by publisher in Business In Cuba

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By Clifford Krauss The New York Times

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 ultradeep-water offshore drilling.
Chevron, Devon Energy and Statoil, the Norwegian oil giant, said Tuesday that they had found 3 billion to 15 billion barrels in several fields 175 miles, or 282 kilometers, offshore.
They said the oil was 30,000 feet, or 9,144 meters, below the gulf’s surface, among formations of rock and salt hundreds of feet thick.
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.
The United States has reserves of 29 billion barrels, meaning that the discovery could increase them by 50 percent. 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.
“This is frontier stuff,” said Daniel Yergin, president of Cambridge Energy Research Associates, noting that the discovery is at levels deeper than deep- sea fields in the North Sea and off North Africa. “Success at these depths in the Gulf of Mexico would facilitate ultradeep-water exploration elsewhere in the world because it will have proven the technology and capabilities.”
It will take more than a year of drilling to confirm the value of the find, and the depth of the water will make extraction extremely expensive - profitable only if oil prices remain at or above $40 a barrel, according to oil industry analysts.
The analysts cautioned that the report was unlikely to give drivers much relief at the pump because full production might not come on line for five years or more. Alone, it seems, it would also make little more than a dent in U.S. energy dependence. And given that America uses 20.5 million barrels of crude oil a day, supply in the new areas would meet the nation’s oil needs for two years at most.
In addition, there is a shortage of rigs able to drill in deep water, another constraint in exploiting the find quickly.
But Chevron and the other companies involved expressed excitement.
The discovery in American waters, said J. Larry Nichols, chairman of Devon Energy, “could not have happened in a better place.”
According to Chevron, the successful test was the culmination of about two years of drilling by the three companies, using seismic and drilling equipment at record depths and pressure.
“Our strong strategic position in the deep-water Gulf of Mexico,” said George Kirkland, a Chevron executive vice president, “will continue to be a platform for future growth for years to come.”
Shell, BP, Exxon Mobil, Anadarko Petroleum and Petróleo Brasileiro have leases on comparable waters in the gulf, and the successful test is likely to set off a wave of drilling in deep waters as well as the building of platforms and the laying of pipelines.
“It’s going to attract deep-pocket and patient investment to work these fields,” said Wayne Andrews, oil analyst at Raymond James & Associates. “These are very expensive wells to drill, and the production facilities required to produce the reserves are also going to be very expensive operations.”
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.
The successful test was first reported Tuesday by The Wall Street Journal.
The three oil partners said that they would drill another appraisal well next year to confirm the full extent of their find, and would probably decide on developing the field late in 2007 or 2008.
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.
“This is a breakthrough that confirms very large reserves of recoverable oil in the Gulf,” Yergin, of Cambridge Energy Research Associates, said. “This announcement also reflects how the oil industry is marching offshore into deeper and deeper waters around the world.”
Successful exploitation of the reserves requires new drill technology and computerized seismic technology to work in water more than a mile deep. “This would have been unthinkable 10 years ago,” Yergin said, “but the technology keeps advancing.”
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.
Havana Journal Publisher NOTE:

Here are two images of the Cuban waters where exploration is being considered or under contract:

Is this discovery near enough to Cuban waters where they might now expand Cuban drilling joint ventures to explore for oil?

Is this discovery good for Cuba?

Find Cuba oil on Amazon

  1. Follow up post #1 added on September 08, 2006 by MiamiCuban

    Anything of this nature is a double edge sword.  It could either be a great opportunity for both countries to intereact and jointly reap benefits, or it could become a source of conflict (let’s hope not).  The irony of this situation, as well as the timing, is mind-boggling.

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