BP PLC has made another "giant" oil discovery in the deep waters of the Gulf of Mexico, confirming the region's growing importance in the North America energy picture and providing further incentive for international oil companies to invest there.
The British major, the largest oil producer in the Gulf of Mexico, said Wednesday it made a major discovery at its Tiber project, about 400 kilometres offshore from Houston, a find that could rival the biggest producers in the region offshore the United States.
The company said the Tiber find appears to be comparable to its largest fields in the Gulf, which hold as much as three billion barrels of oil each.
With the shallow waters of the Gulf well-explored, oil companies have been moving into deeper water, increasing the stakes for each multimillion-dollar well drilled.
The Tiber discovery was located in 1,259 metres of water, with a total well depth of 10,685 metres, which BP believes is the deepest ever drilled.
But for international oil companies, the Gulf of Mexico offers a stable political environment and attractive tax structure, at a time when foreign governments are limiting their access to the most promising new fields.
Just this week, Brazil announced it would require state-controlled Petroleo Brasileiro SA (Petrobras), to be the operator of the so-called presalt projects in its offshore, which has seen some of the most exciting oil discoveries of the last decade.
While BP is the biggest producer in the Gulf of Mexico, all the majors - Exxon Mobil Corp., Chevron Corp., ConocoPhillips Co., and Royal Dutch Shell PLC - have significant exploration programs in the deep water there.
"If they look across the globe and try to pick out regions where they can achieve growth that is material to their portfolio, this is really one of the only areas that they can do that," said Bob MacKnight, a senior consultant with Washington, D.C.-based PFC Energy Group.
"They're only seeing doors shut in their faces as they go everywhere else. This is one place where they know the rules won't really change on them and that they can actually get fields that could impact their portfolios."
The Gulf of Mexico has for years been a critical source of domestic crude oil supply as production declines in the Lower 48 states and Alaska. It now supplies 28 per cent of U.S. domestic production, but even there, output is expected to peak in the next three years.
The Tiber discovery is one of several in recent years in the ultradeep lower tertiary formation in the Gulf - BP itself plans further wells to delineate an earlier, nearby discovery known as Kaskida, which could contain some three billion barrels of oil.
"This is desperately needed," Mr. MacKnight said. The oil companies "really needed some other things in the queue that would stem the decline after 2012."
The analyst said a lot of additional drilling will be needed to confirm the size of the Tiber find, but that BP was keen to indicate its success in the field, after several years of setbacks.
BP spokesman Daren Beaudo said the Tiber well was the deepest the company had ever drilled, and he believed a record for the industry. As a result, it will require innovative engineering techniques to recover the crude, given the pressure and temperatures that exist at 10,685 metres below the surface. "The information we have is very encouraging but we need to do some appraisal work," he said.
BP now produces 400,000 barrels of oil a day in the Gulf, up from 200,000 in 2000, and it expects to increase that in the coming years.
"I think this excites people who are interested in developing in the deep waters of the Gulf of Mexico," Mr. Beaudo said.
The success in the Gulf of Mexico underscores industry efforts to persuade the U.S. government - and the states - to open other offshore areas to exploration, notably offshore California, which is considered the most promising.
The Tiber discovery "is a further demonstration of how we can safely develop these offshore resources and offers a glimpse at the potential for developing other offshore resources in the U.S.," he said.
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