Vast Oil Pool Tapped in Gulf of Mexico
Wednesday, September 6, 2006; 1:29 AM
WASHINGTON -- A trio of oil companies led by Chevron Corp. has tapped a petroleum pool deep beneath the Gulf of Mexico that could boost the nation's reserves by more than 50 percent.
A test well indicates it could be the biggest new domestic oil discovery since Alaska's Prudhoe Bay a generation ago. But the vast oil deposit roughly four miles beneath the ocean floor won't significantly reduce the country's dependence on foreign oil and it won't help lower prices at the pump anytime soon, analysts said.
"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."
Chevron on Tuesday estimated the 300-square-mile region where its test well sits could hold between 3 billion and 15 billion barrels of oil and natural gas liquids. The U.S. consumes roughly 5.7 billion barrels of crude-oil in a year.
It will take many years and tens of billions of dollars to bring the newly tapped oil to market, but the discovery carries particular importance for the industry at a time when Western oil and gas companies are finding fewer opportunities in politically unstable parts of the world, including the Middle East, Africa and Russia.
The proximity of the Gulf of Mexico to the world's largest oil consuming nation makes it especially attractive. And it 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.
The country's reserves currently are more than 29 billion barrels of oil equivalent, according to the U.S. Energy Department. But the U.S. imports most of its oil from abroad and its overall supply is tiny when compared with, say, Saudi Arabia, whose reserves exceed 250 billion barrels.
Chevron's well, called "Jack 2," was drilled about 5.3 miles below sea level. Chevron has a 50 percent stake in the field, while partners Statoil ASA of Norway and Devon Energy Corp. of Oklahoma City own 25 percent each.
During the test, the Jack 2 well sustained a flow rate of more than 6,000 barrels of oil per day, but analysts and executives believe the payoff could be much larger than that.
The financial implications of the prospect are most significant for independent oil and gas producer Devon, which is the smallest of the three partners. Devon's shares soared 12 percent on the New York Stock Exchange.
"This could not have happened in a better place," Devon CEO Larry Nichols said in a conference call with analysts.
The successful test well does not mean a huge supply of cheap oil will hit the market anytime soon.