BP Finds 'Giant' Oil Source Deep Under Gulf of Mexico
Thursday, September 3, 2009
BP said Wednesday that it made a "giant" oil discovery in the Gulf of Mexico, and analysts said that the find deep below the sea floor raised hopes that further exploration in the region could help sustain U.S. offshore oil production.
The discovery, known as Tiber, was made 250 miles southeast of Houston and was "in the same league" as other big fields BP has discovered in the Gulf of Mexico, BP spokesman Daren Beaudo said. The company would not make any estimates on the amount of oil its latest find could yield, but the biggest platform in those other fields, Thunder Horse, is producing as much as 300,000 barrels a day.
The exploration well used to find the Tiber field was the deepest vertical well ever drilled, according to Guy Cantwell, communications director at Transocean, the offshore drilling company that owns the rig. Working conditions were challenging, he said. The rig, the Deepwater Horizon, dangled about a million pounds of well casing while floating in 4,132 feet of water, and then drilled another 30,923 feet below the sea floor. Temperatures at the sea floor were about 35 degrees, while the temperature of fluids in the well miles below was 250 degrees.
Bob MacKnight, a senior consultant with the Washington consulting firm PFC Energy, cautioned that while the big new discoveries were welcome news, they might not boost overall U.S. oil output because other Gulf of Mexico fields are expected to decline. "We really need this," he said. "After 2012, given current developments, we will see production start to decline. Without continued discoveries . . . that decline could be steep."
Production in the Gulf of Mexico accounts for about a quarter of total U.S. oil production, or about 1.2 million barrels a day. U.S. production in the Gulf peaked in 2003 at 1.56 million barrels a day, according to the Energy Information Administration.
"So sustaining that going forward is a really important thing from an energy independence standpoint," MacKnight said. He noted that most Gulf of Mexico production wells tend to hit their peak within a year or two, and then begin to drop steeply three to five years later.
Development of deepwater discoveries takes time. BP's Thunder Horse discovery was made in 1999, but the platform, beset by technical problems and hurricanes, didn't begin producing until June 2008.
Daniel Yergin, chairman of Cambridge Energy Research Associates, said that the discovery "demonstrates how technology continues to expand the horizon of the Gulf of Mexico."
BP said that the well struck oil in "multiple reservoirs" in the Lower Tertiary geologic zone, a layer of the earth's crust dating back 38 million to 68 million years. More than 10 discoveries have been made at that level in the Gulf, including BP's Kaskida find, which has estimated reserves -- about a third or less recoverable -- of 4 billion to 6 billion barrels. "We view the Lower Tertiary as one of the next big waves of development in the Gulf of Mexico," Beaudo said.
The new discovery is welcome news for BP, which owns 62 percent of the project. In recent years BP has struggled with disputes with partners in a Russian joint venture, delays in its Thunder Horse platform, leaks in its Alaska pipeline and fallout from a Texas refinery explosion. But the British company has continued to pursue a strategy focused on opportunities to tap giant oil reservoirs, whether in the Gulf of Mexico, Iraq or Russia.
Conoco Phillips owns 18 percent of the Tiber project and the Brazilian state oil company Petrobras owns 20 percent. Brazil's president, Luiz Inácio Lula da Silva, this week vowed to give Petrobras operating rights in huge fields recently discovered off the coast of Brazil, instead of using a concession system. When foreign companies are needed to help cover costs, Petrobras would still retain a 30 percent interest, news agencies said.
Yergin said that the latest BP discovery "also shows the value of having different companies with different perspectives and different approaches working in a province like the Gulf of Mexico."