A consortium of U.S. and Canadian companies confirmed today that a Canadian offshore oil well may be the single biggest potential oil producer in North America.
Chevron Standard Ltd. of Calgary announced that the well -- Hibernia P-15 -- is capable of producing "in excess of 20,000 barrels a day." This would make it the largest single well in Canada or the United States. Chevron's partners include Gulf Canada Resources Ltd. and Petro Canada Exploration Inc. All but Petro Canada are U.S. controlled.
The Hibernia well could be the first commercially viable oil well off the East Coast of the continent. The well, 16,000 feet deep, is located about 195 miles southwest of St. John's, Newfoundland.
Oil analysts have been comparing the Hibernia discovery with the huge "elephant" wells in the North Sea. But they also note that such wells are expensive to drill and expensive to put into production.
Chevron says additional wells must be drilled and tested to determine if the Hibernia field contains sufficiently large recoverable reserves to justify the $1 billion or more required to bring the discovery into full production.
Chevron Vice President G. L. Henderson says "things could still be disappointing, but we've certainly passed the first hurdle."
Like the analysts, he cautions that the North Sea potential also carries the big North Sea price tags for exploration and production.
Development costs for some North Sea fields range from $3 billion to $6 billion, and that is money that has to be spent before any cash from production starts flowing, Henderson adds.
He warns that it's too early to speculate on the price tag or recoverable reserve potential of the Hibernia field. However some analysts here are projecting from one to three billion barrels of recoverable oil.
Analysts also see the possibility of temporary production facilities to bring some oil on stream by 1982.
"It's much too soon to talk in production terms," Henderson says. There is still a lot more to "find out about the size and distribution of the reserves."
Chevron says the consortium began drilling the first stepout well three miles west of the discovery well on Jan. 1. It should reach a projected depth of 16,000 feet in about four months. A second stepout well, probably north of the P-15 discovery, is planned to start drilling early next month.
A spokesman for the Newfoundland government says, "We're very pleased with the results. The well is world-scale. It's North Sea proportions -- and if other wells in the field are that good, we're well on our way to commercial production."
The Hibernia discovery was announced early in the fall and created hopes that oil could be flowing to Eastern Canada by 1985 if it proved commercial and if Ottawa reached a revenue sharing agreement with the provincial government.
The initial news of the discovery sparked heavy activity in shares of companies with Canadian East Coast offshore interests. Since the discovery Chevron has issued cautious statements as it tabulated production test results over the past few months.
In a related development, Mexico today announced it was raising its crude oil price from $24.60 a barrel to $32 a barrel. The Mexican government also announced that it was reserving the right to raise prices even higher because of the "uncertain situation in the world petroleum market."
The Mexican action was immediately denounced by the United States. The State Department called the price increase "unjustified" and said it was concerned about the impact of the increase on the world economy.
Mexico is not a member of the Organization of Petroleum Exporting Countries, but it has traditionally kept its prices close to the OPEC price level.
In another action today, Royal Dutch-Shell disclosed that it has reached agreement with the government of Iran for 1980 oil supplies. A company spokesman said the contract is for nine months and calls for deliveries of 95,000-barrels of oil a day at an average price of $30 a barrel.