Incredible New Source Of Oil Found!

[Kor37 9]

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Chevron Finds Promising Oil Source in Gulf of Mexico

 

By RUSSELL GOLD, The Wall Street Journal

 

 

The oil industry is on the verge of cracking open a deep-water region in the Gulf of Mexico that could become the nation's biggest new domestic source of oil since the discovery of Alaska's North Slope more than a generation ago.

 

Chevron Corp. and partners Devon Energy Corp. and Statoil ASA announced today the first successful oil production from the region, a 300-mile-wide swath of the Gulf that lies below miles of water and deep within a bed of ancient rocks geologists call the lower tertiary. The company said the well sustained a flow rate of more than 6,000 barrels of crude oil a day during the production test.

 

The test paves the way for the development of the three partners' Jack field, located 270 miles southwest of New Orleans, and ultimately for dozens of comparable discoveries under federal lease to companies that include Anadarko Petroleum Corp., Petróleo Brasileiro SA, Exxon Mobil Corp., BP PLC and Royal Dutch Shell PLC.

 

Chevron and Devon officials estimate that the recent discoveries in the Gulf of Mexico's lower-tertiary formations hold more than three billion barrels' and perhaps as much as 15 billion barrels' worth of oil and gas reserves. If the industry succeeds in finding 15 billion barrels of oil, it would boost the nation's current reserves of 29.3 billion barrels by 50%.

 

And if all these new finds were successfully exploited, they could approach or perhaps exceed the output of Alaska's giant Prudhoe Bay, the largest U.S. oil field.

 

While the new discoveries are sizable, they won't usher in an era of plentiful, low-priced oil. The Gulf's lower-tertiary reservoirs don't come close in size to the enormous oil fields of the Middle East or even Mexico's huge, but tired, Cantarell oil field in the waters off the Yucatán Peninsula. Still, a major new oil source in U.S. waters could help to cool the heated market for crude oil.

 

Though oil prices slipped below $70 a barrel in New York trading Friday on a pared-back forecast for the current hurricane season, they have risen for the past two years. Factors fueling the rise include shrinking surplus production capacity, fear that global oil output is peaking, instability in several oil-producing regions and a rising tide of oil nationalism, which has led some countries to tighten control over their oil resources.

 

 

 

With three-quarters of the world's oil and natural-gas resources off-limits to Western oil companies, the high oil prices swelling their coffers have encouraged them to take bigger financial risks in search of new sources of oil.

 

The five-mile-deep Jack well, among the world's deepest production wells, is thought to have cost more than $100 million, according to industry officials. Developing Jack and the other lower-tertiary fields could cost several billion dollars for drilling, building platforms and laying pipelines to take the oil ashore.

 

"The well test is an important milestone" in unlocking the new region's commercial potential, says Paul Siegele, who heads Chevron's deep-water Gulf exploration unit. "Based on the oil in place and the amount of structures yet to be drilled, this is exciting."

 

Companies aren't disclosing how much oil they think they have found in most of the region's fields. Devon, however, says its four discoveries, including Jack, hold at least 300 million barrels each, making them among the largest fields discovered anywhere in the world in the past few years, according to Wood Mackenzie, an Edinburgh, Scotland, energy consulting firm.

 

At a time when energy companies are struggling to replace reserves, the Gulf's deep-water lower-tertiary region "is one of the few exploration success stories where potentially world-class finds have been made in recent years," says Wood Mackenzie oil analyst Zoë Sutherland.

 

Many of the finds in the region are still unexplored. There are four discoveries near Jack. Two hundred miles to the west, there are five discoveries clustered together, including Royal Dutch Shell's Great White field, which Wood Mackenzie estimates holds the equivalent of 500 million barrels' worth of oil and natural gas.

 

The area in between has recently yielded its first strike -- and potentially the largest yet. On Thursday, BP said its exploratory Kaskida well had passed through 800 feet of oil-bearing rock, the second-thickest oil zone ever found in the Gulf of Mexico.

 

Last year, a team of Chevron geologists estimated that between three billion and 15 billion barrels of oil could be extracted from the Gulf of Mexico's lower-tertiary rocks. "I suspect today that is on the low side," says Larry Nichols, Devon's chairman and chief executive. Chevron, which is based in San Ramon, Calif., agrees that the three-billion-barrel end of the range is probably low.

 

Devon, an Oklahoma City oil company about a fifth the size of Chevron by market capitalization, stands to benefit the most from the emerging oil reserves in the Gulf's lower tertiary. After Chevron, it holds the second-largest number of exploration leases in the region. Company officials said they believe Devon's fractional interest in four discoveries, including Jack and Kaskida, could yield 900 million barrels of reserves -- a 43% increase to its year-end booked reserves.

 

With the Jack well, Chevron and its partners are hoping to kick off a new wave of Gulf of Mexico exploration. Since the first oil derricks went up in Gulf waters in 1947, more than 99% of the oil and natural-gas molecules have been sucked out of rocks no more than 24 million years old. The Jack well and others in the region are drilled into older rocks that remain largely unexplored.

 

Technological gains have made the new wells possible. Today's floating oil rigs can drill deeper than their predecessors, and advances in seismic exploration -- the use of sound waves to map underground oil and gas formations -- have made it possible to detect oil below the massive salt canopies that typically sit atop the Gulf's lower-tertiary rock formations.

 

Until recently, seismic images from below these salt formations were muffled and largely useless. The oil companies, however, developed new mathematical formulas that allow them to interpret the images, bringing potential new troves of oil and gas into focus.

 

Oil companies still face technical challenges in tapping the lower tertiary, which requires them to penetrate unprecedented depths. Before the test of the Jack well, one of the biggest concerns had been that the rocks in the lower tertiary might be so tight that pulling the oil out would be prohibitively expensive. Now, "that is not a concern," says Mr. Nichols of Devon. "You will be able to flow these wells at a commercial rate."

 

Others are more conservative in their assessment. While the Jack test flowed oil into a pipeline for more than month, Chevron's Mr. Siegele says he would be more comfortable seeing the well perform for a year before proceeding.

 

Chevron says it and its partners haven't decided whether to drill another appraisal well or move straight ahead to developing the Jack field. Getting set up to produce oil could take three years or longer.

 

The three partners discovered Jack, which is under 7,000 feet of water, in May 2004. One 29,066-foot-deep well was drilled that year and a second 28,175-foot-deep well followed in 2005.

 

This spring, the companies parked the Cajun Express, a 350-foot floating rig, above the second well and turned on the well. Chevron says it produced 6,000 barrels of oil a day, a maximum rate set to prevent damage to equipment. They perforated only a portion of the 350-foot-thick reservoir. The oil is both light and sweet, says Mr. Siegele, the kind that commands the best prices and is in the most demand.

 

 

09/05/06

 

This is great news. Now if only they could build some new refineries to process all of this oil!

Edited September 5, 2006 by Kor37

[youbroughtheryouRiker 2]

Heard about this. Sounds nice. It's a shame that it won't help aid our struggle to be free of foreign oil altogether though. The only real way to accomplish that is to be free of oil, period.

[Odie 0]

This is great news. Now if only they could build some new refineries to process all of this oil!

 

The last oil refineries where built in the 70's. I really do not see them building more to meet the demand for their product. Heaven forbid we lowly people actually pay our fair share in the market value in gas.