BP reveals ‘giant’ oil discovery - Gulf of Mexico field likely to hold at least 3bn barrels

BP reveals ‘giant’ oil discovery - Gulf of Mexico field likely to hold at least 3bn barrels
By Ed Crooks
Copyright The Financial Times Limited 2009
Published: September 2 2009 12:01 | Last updated: September 2 2009 13:02
http://www.ft.com/cms/s/0/9604b684-97ad-11de-a927-00144feabdc0.html


BP, the UK energy group, on Wednesday reported a “giant” discovery in the Gulf of Mexico – in what looks to be one of the largest finds of recent years – that helps open a new frontier for US oil production.

The Tiber field, in deep water about 250 miles south-east of Houston, is likely to hold at least 3bn barrels of oil, with 500m-plus of that recoverable with today’s technology, but could be even larger.

BP said the first well drilled on the prospect suggested that Tiber appeared to be bigger than its Kaskida field, which is also in the Gulf of Mexico and was discovered in August 2006.

One recent estimate suggested Kaskida could hold 4bn-6bn barrels.

The Tiber discovery is in one of the deepest wells ever drilled, in 1,260m of water with a total depth of 10,685m – more than 6½ miles – which will make developing the field extremely challenging. US regulations have previously meant that the oil would have to be piped to shore, rather than loaded on to tankers out at sea.

Analysts suggested Tiber was unlikely to be producing before 2014, but even that date seems optimistic, given that BP’s previous large-scale development in the Gulf – the Thunder Horse field – was first discovered in 1999 but only came into production, after a series of mishaps, at the end of 2008.

Once in production, however, Tiber and Kaskida could lift BP’s output in the Gulf of Mexico – where it is already the single largest producer – from 400,000 barrels of oil equivalent a day to about 650,000 b/d.

Andy Inglis, BP’s head of exploration and production, said in a statement: “Tiber represents BP’s second material discovery in the emerging Lower Tertiary play in the Gulf of Mexico... These material discoveries together with our industry-leading acreage position support the continuing growth of our deep water Gulf of Mexico business into the second half of the next decade.”

In afternoon trading in London BP’s shares were up 18.55p, about 3.6 per cent, at 538.05p, making them the biggest gainers on the FTSE 100 index.

In a note on Wednesday, analysts at Goldman Sachs said the Tiber discovery was “good news for BP, but it is hardly transformational and does not provide a solution to their thin pipeline of new projects in the 2010-13 period.”

UBS said: “GoM [Gulf of Mexico] oil discoveries are the highest value globally so this is a big positive – probably worth at least 3 per cent even to a company the size of BP.”

Production in the US is highly sought-after, as the fiscal and regulatory terms are much more reliable than in most resource-rich countries, and the US is the world’s biggest market for oil.

The Lower Tertiary rocks in the deep waters of the Gulf of Mexico, laid down 34m-66m years ago, are seen as offering some of the most exciting potential for US oil production.

BP’s exploration successes will encourage hopes that that potential can be realised and the decline of US oil production slowed.

Following a successful well result in 2006, Chevron, the second-largest US oil group, suggested it had found a part of the Lower Tertiary that could hold 3bn-15bn barrels of oil.