Gulf of Mexico Oil FindsSources

Tiber Well

http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20090903/bp_oil_090904/20090903?hub=SciTech

BP taps vast pool of crude in deepest oil well

Updated Thu. Sep. 3 2009 8:39 AM ET

The Associated Press

NEW YORK -- Nearly seven miles below the Gulf of Mexico, oil company BP has tapped into a vast pool of crude after digging the deepest oil well in the world.

The Tiber Prospect is expected to rank among the largest petroleum discoveries in the United States, potentially producing half as much crude in a day as Alaska's famous North Slope oil field.

The company's chief of exploration on Wednesday estimated that the Tiber deposit holds between 4 billion and 6 billion barrels of oil equivalent, which includes natural gas. That would be enough to satisfy U.S. demand for crude for nearly one year. But BP does not yet know how much it can extract.

"The Gulf of Mexico is proving to be a growing oil province, and a profitable one if you can find the reserves," said Tyler Priest, professor and director of Global Studies at the Bauer College of Business at the University of Houston.

The Tiber well is about 250 miles southeast of Houston in U.S. waters. At 35,055 feet, it is as deep as Mount Everest is tall, not including more than 4,000 feet of water above it.

Drilling at those depths shows how far major oil producers will go to find new supplies as global reserves dwindle, and how technology has advanced, allowing them to reach once-unimaginable depths.

Deep-water operations are considered to be the last frontier for pristine oil deposits, and the entire petroleum industry is sweeping the ocean floor in search of more crude.

BP needs to invest years of work and millions of dollars before it draws the first drop of oil from Tiber. Such long waits are not uncommon. Three years after

announcing a discovery at a site in the Gulf called Kaskida, BP has yet to begin producing oil there.

Projects like the Tiber well will not reduce U.S. dependency on foreign oil, which continues to grow. But new technology does permit access to major oil finds closer to U.S. shores.

BP expects Tiber to be among the company's richest finds in the Gulf on par with its crown jewel, the Thunder Horse development. Thunder Horse produces about 300,000 barrels of oil equivalent per day, as much crude as half of Alaska's famous North Slope.

Even if Tiber produces that much, it would still be a trickle compared with the largest oil producers in the world -- the Ghawar field in Saudi Arabia, which produces 5 million barrels per day.

But because it's close to home, Tiber would be especially attractive to refiners in America, where the government wants to cut down on oil imports from the Middle East.

"Early indications are that it's a significant positive discovery," said Matt Snyder, lead analyst with Wood MacKinzie's Gulf of Mexico research team.

Exploration companies recently have been pushing drilling operations farther from shore because of technological improvements that allow them to handle extreme depths and pressure, Snyder said.

It's an expensive process. A production platform costs more than $1 billion to build. Drilling a deep-water well can add another $100 million, and if crude is located, it could cost another $50 million to bring the oil to the surface.

"And when they finally get down there, it's very hot," said Leta Smith, a director with Cambridge Energy Research Associates' Global Oil Supply Group.

"It could be upwards of 250 degrees Fahrenheit. The pressures can be the most challenging aspect of it. These rocks are over-pressured, which means you need to have a lot of special equipment."

For an ambitious project like Tiber to pay off, experts say crude must cost at least $70 to $75 per barrel, though lower prices have never slowed the industry. When crude prices fell below $20 per barrel in the late 1990s, exploration and Thunder Horse never slowed.

"They're not swayed by daily price swings when it comes to planning deep-water exploration," Priest said.

BP's discovery is the latest in what's called the "lower tertiary" region, an ancient section of rock in the Gulf that is roughly 300 square miles and formed between 24 million and 65 million years ago.

Chevron Corp. drilled one of the first wells in the region in 2001, followed by more than a dozen others from companies such as Royal Dutch Shell, Australian oil company BHP Billiton, BP and Total SA, according to the U.S. Department of Interior's Minerals Management Service.

In 2006, Chevron estimated that the lower tertiary holds between 3 billion and 15 billion barrels. But it has taken years to develop wells for commercial use.

Smith said that the first drops of crude from the lower tertiary will arrive in 2010 with Shell's Perdido operation and Petrobras's Cascade and Chinook developments.

BP has a 62 percent working interest in the Tiber well. Petrobras owns 20 percent while ConocoPhillips owns 18 percent.

Perdido

http://www.shell.com/home/content/aboutshell/our_strategy/major_projects_2/perdido/perdido_13032008.html

Perdido

Shell has been a leader in deepwater exploration and production for the last 30 years. Perdido in the Gulf of Mexico is one of our most challenging deepwater projects. Shell has a 35% interest in the project and is the operator. Perdido is in a water depth of some 2,380 metres and will have a peak production of 130,000 boe/day from three fields. First production from Perdido is expected in early 2010.

Key facts

Location: Gulf of Mexico, US

Depth: ~2,380 metresInterests: Shell 35% (operator), Chevron 37.5%, BP 27.5%Fields: Great White, Tobago, SilvertipPeak Production: 130 kboe/d [API: 18-40]Key contractors: Technip, Kiewit, FMC Technologies, Heerema Marine Contractors

Technology

Perdido, moored in ~2,380m of water, will be the world’s deepest Direct Vertical Access Spar. The spar will act as a hub for, and enable development of, three fields – Great White, Tobago, and Silvertip – and it will gather, process and export production within a

48km radius. Tobago, in ~2,925m of water, will be the world’s deepest subsea completion.

Environment and society

Social and environmental responsibility is a central pillar of Shell’s operations. Shell’s Gulf of Mexico operations have a long association with the city of New Orleans, and this is reflected in the contribution the company has made to many recovery programmes after Hurricane Katrina. Shell’s "Coming Home" campaign and sponsorship of the New Orleans Jazz and Heritage Festival – a key event in the city’s on-going recovery – helped build confidence in the City’s future. Shell is also involved in projects such as wetlands restoration on the Texas/ Louisiana coast.

Current developments

The Perdido spar was constructed by Technip in Pori, Finland and began its 13,200-kilometre journey to Texas in May 2008, arriving in the Gulf of Mexico in August 2008. The 555-foot cylindrical spar has now been secured to the sea floor and Shell has completed the installation of the drilling and production platform on top of it. Over the next several months, approximately 270 personnel living on the platform and on a “flotel” alongside it will complete the myriad of tasks in the commissioning and hookup required to produce first oil.

There will be 22 direct vertical access wells from the spar, with an additional 13 tiebacks from subsea completions. Once completed, the Perdido spar will be nearly as tall as the Eiffel Tower and weigh the same as 10,000 cars.

The Noble Clyde Boudreaux platform is currently drilling the production wells. In December 2008 we set a world record with the deepest completed offshore production well, at about 2,852 metres (9,356 feet) below the water’s surface. Another well currently being drilled in the Tobago field will go deeper at around 2,925 metres (9,627 feet).

Buckskin

http://www.energycurrent.com/index.php?id=2&storyid=15811

Chevron makes deepwater discovery at Buckskin

2/5/2009 3:19:03 PM GMT

HOUSTON: Chevron (NYSE: CVX) has made a discovery at its Buckskin prospect on Keathley Canyon Block 872 in the deepwater Gulf of Mexico. The discovery is 44 miles (70.8 km) west of Chevron's 2004 Jack discovery, also in the lower Tertiary.

The Buckskin No. 1 discovery well encountered over 300 feet (91.4 m) of net pay. The well is in around 6,920 feet (2,109 m) of water and was drilled to a depth of 29,404 feet (8,962 m) by Stena drillship Stena Drillmax.

More tests are being conducted on data gathered from the discovery well. Additional work at the prospect will be needed to determine the extent and commercial viability of the discovery.

Repsol was the operator of the Buckskin discovery well with a 12.5 percent working interest in the prospect. Chevron, which holds a 55 percent working interest, will take over as operator and conduct all future work. Other partners in Buckskin include Maersk Oil America with 20 percent interest and Samson offshore Co. with a 12.5 percent interest.

Chevron Executive Vice President of Global Upstream and Gas George Kirkland said, "This is a very significant discovery in the lower Tertiary trend, where Chevron is the largest leaseholder. Continuing our success at the Jack well, Buckskin reinforces the trend's potential to provide the U.S. with important new energy supplies."

Shenandoah

http://www.miningtopnews.com/anadarko-announces-another-deepwater-gulf-of-mexico-discovery.html

Anadarko Announces Another Deepwater Gulf of Mexico DiscoveryFebruary 4, 2009 Filed Under: Oil and Gas  

Anadarko Petroleum Corporation announced its second deepwater Gulf of Mexico discovery this week. The Shenandoah discovery well, located in Walker Ridge block 52, encountered net oil pay approaching 300 feet in the Wilcox formation.

“This has been a remarkable week, with back-to-back deepwater discoveries in the Gulf of Mexico,” said Bob Daniels, Anadarko Sr. Vice President, Worldwide Exploration. “Initial data indicates the Shenandoah discovery has reservoir properties that appear to be of much higher quality than industry has seen previously in the emerging Lower-Tertiary play. The success of this well and our recent Heidelberg discovery further confirms the value of Anadarko’s extensive acreage position and our capability in exploring proven and emerging deepwater basins worldwide.”

Shenandoah is located in approximately 5,750 feet of water and was drilled to a total depth of about 30,000 feet. Anadarko and the co-owners of the discovery are evaluating the well results and the next steps toward future appraisal activity. Anadarko operates Shenandoah with a 30-percent working interest. Co-owners of the discovery include ConocoPhillips (40-percent working interest), Cobalt International Energy, L.P. (20-percent working interest) and Marathon (10-percent working interest).

Also in the deepwater Gulf of Mexico, Anadarko expects to spud the Vito Middle-Miocene prospect in Mississippi Canyon block 984 and the Samurai Middle- and Lower-Miocene exploration well in Green Canyon block 432 during the first quarter. Anadarko operates these wells with a 20-percent working interest and a 33.33-percent working interest, respectively.

Cascade/Chinook

http://www.offshore-technology.com/projects/cascadechinook/

Cascade and Chinook Subsea Development, Gulf of Mexico, Mexico

Key DataLocationGulf of MexicoDevelopment StrategySubsea wells to FSPOFirst Oil2010 with production in Q1 2010Water Depth2,600mBlockWalker Ridge BlockShoreAround 300km (180 miles) south of LouisianaWellsCascade – 2 wellsFull specifications

The most significant aspect of Petrobras's Cascade and Chinook development in the Gulf of Mexico is the company's intent to deploy a Floating Production, Storage and Offloading (FPSO) facility to accept production from the two fields. Petrobras plans to fast track the development of both the FPSO and the fields.

According to Petrobras, the schedule calls for installation of the FPSO early in 2010 with first production in the first quarter of 2010. The FPSO will be located in approximately 2,600m of water, will be the first in the US Gulf of Mexico and will be the world's deepest FPSO to date.

Det Norske Veritas (DNV) is the certified verification agent (CVA) and class agent for the project. DNV ensures that all the significant elements of the project meet US MMS (Minerals Management Service) requirements.

Cascade and Chinook fields

Cascade and Chinook are located in the Walker Ridge block, around 300km (180 miles) south of the Louisiana coast. Petrobras is the operator of both the Cascade and Chinook units, owning 50% and 66.67% of the fields respectively. The remaining 50% of Cascade is owned by Devon Energy Corporation, while Total E&P owns the remaining 33.33% of Chinook.

KBR's wholly owned subsidiary, Granherne, was awarded a three-year contract for engineering services. Granherne will be providing technical support for design of the hull for the Early Production System (EPS), Floating Production Storage and Offloading system (FPSO), and later phase Full Field Development (FFD).

The fields will be developed two subsea wells in Cascade and one subsea well in Chinook, approximately 30km south of Cascade. Each well will be drilled to an approximate depth of 27,000ft, and based on reservoir performance. Petrobras may expand production to additional subsea wells on each field.

Subsea contracts

Petrobras awarded FMC Technologies a $200m contract to supply subsea systems. Subsea electric submersible pumps will boost production from subsea to the FPSO. The contract calls for the delivery of four horizontal subsea trees, three manifolds, control systems, and two subsea horizontal electric submersible pumping systems. Deliveries are expected to start in the final quarter of 2008.

"The fields will be developed two subsea wells in Cascade and one subsea well in Chinook."

Petrobras signed a contract with Heerema Marine Contractors (HMC) for the installation of the Chinook infield flowlines. The two pipe-in-pipe flowlines are each 12 miles long with a 14in casing pipe carrying a 9in inner pipe, and will be installed in water depths ranging from 8,000ft to 8,800ft (2,440m to 2,680m) as part of the phase one. The Chinook pipe-in-pipe project is scheduled for offshore execution in Spring 2009.

Petrobras awarded Aker Kværner a $65m contract to supply subsea power cables and control umbilicals. Aker Kværner is to supply 230,000ft (70km) of high-voltage power cables and static and dynamic steel tube. The umbilicals will be made using Aker Kværner's patented carbon-fibre rod technology.

Project management, engineering and manufacturing will be at Aker Kværner's Mobile, Alabama, facility. Delivery of the cables and umbilicals is scheduled for mid-2009.

Free-standing hybrid risers, used to transport oil and gas from the subsea flowline to the FPSO and gas from the FPSO to the export pipeline.

UK based First Subsea will supply mooring connections for a detachable submerged turret production (STP) buoy to APL AS, the technology division of BW Offshore. The mooring connections supplied by First Subsea include 11 series II ball and taper Ballgrab connections that feature minimum breaking load of 6,600KN.

Sonardyne International was chosen to supply an integrated acoustic positioning and telemetric system as a part of an extensive life-of-field integrity monitoring system for

five Free Standing Hybrid Risers (FSHRs) in the field. The deal was awarded to Sonardyne by BMT Scientific Marine Services which was chosen as the systems integrator for the project.

FPSO

The FPSO is specified to have 600,000 barrels of oil storage capacity, 80,000bpd processing capacity, and 16mmcfpd of natural gas export capacity. It will feature a disconnectable turret buoy, allowing the FPSO to move offsite during severe weather events such as hurricanes. It is moored by a polyester mooring system linked to torpedo piles and vertical loaded anchors.

"Petrobras is the operator of both the Cascade and Chinook units."

The crude will be offloaded via a shuttle tanker. Petrobras selected BW Offshore the contract to convert, install, and operate the FPSO. The $740m contract will cover delivery and installation of an advanced production and loading (APL) disconnectable submerged turret production buoy and mooring system.

Bristol-based DPS was awarded the EPC contract for the crude stabilisation and flare modules that will form an integral part of BW Offshore's design. DPS will also be responsible for managing the process and piping interfaces for the entire process topsides.

http://www.geoexpro.com/geoscience/deep_water/

Deep-Water Gulf of Mexico

With 12 recently announced deep-water discoveries and an aggressive leasing schedule for the Western and Central Gulf of Mexico, exploration and production technology is being pushed to its limits.

With 12 recently announced deep-water discoveries and an aggressive leasing schedule for the Western and Central Gulf of Mexico, exploration and production technology is being pushed to its limits. To meet industryneeds to image deeper and more obscure targets, TGS-NOPEC Geophysical Company has over 2.5 million km of 2-D and 88,000 km2 of 3-D seismic data available in the Gulf, of which this line is an example.

For nearly 70 years, the sediments in the Gulf of Mexico have provided what seems to be no end for exploration targets. With new technologies to tackle deeper and deeper water depths and objectives, this trend continues. Lower Tertiary Wilcox reservoirs have become the focus for exploration. Recent major discoveries in this trend have confirmed

it to be a worldclass petroleum system with a potential that could exceed 15 billion barrels of oil (2.4 billion m3) recoverable.

The Gulf of Mexico was formed as a result of seafloor spreading that started in Late Triassic and continued through Middle Jurassic time (GEO ExPro, v. 3, No. 4/5, pp 14-24; www.geoexpro.com). Since Late Jurassic, the basin has been a stable geologic province. The central Gulf has been characterized by persistent subsidence, first from thermal cooling, and later from sediment loading, as the basin filled with thick, prograding clastic wedges along its northern margins. Widespread evaporate deposits, primarily salt, play a critical role in the movement and entrapment of hydrocarbons in the Gulf of Mexico. It was deposited in the Middle Jurassic during the time when rifting pulled North America away from the Yucatan Peninsula to the south about 200 million years ago. Being weaker and less dense than other rocks at depth, the salt moved south and upward responding to sediment loading that was prograding from the north. The upward movement of salt through the surrounding rock is responsible for most of the structures in the present day Gulf of Mexico slope area. Folding, detachment, and normal faulting of the reservoir rocks near the salt structures can be complex and difficult to image.

The Wilcox Trend

The Lower Tertiary Wilcox stratigraphic trend has been recognized since the 1930’s as an important exploration target for southeast Texas and southwestern Louisiana. Here, production is primarily gas from fluvial, deltaic, and shallow marine sandstones. It was not until Shell, Amoco, Texaco and Mobil drilled the BAHA 2 well in March, 2001, that the link between the Wilcox shelf fluvial deltaics and deep basin turbities was tested. This well was drilled in 2,375 m of water and over 400 km from the onshore producing trend. Several significant discoveries establishing the potential of this trend followed. This pre-stack, depth migrated seismic section crosses the Walker Ridge area in the central Gulf of Mexico. Exploration wells are shown across the top of the section. The Cascade, Chinook, and St. Malo wells all encountered significant amountsof oil (in excess of 100 million barrels each) in the deep-water Wilcox trend between Cretaceous (K) and Paleocene (PA) geologic horizons. The Cascade well was drilled in 2482 m of water to a depth of 8,515 m. This well established the play to the east of previous wells and 560 km down dip from its deltaic source. The Chinook and St. Malo discoveries followed. Trend water depths range from 1524 m to 3049 m and objectives can be found 3000 m to more than 9000 m subsea. The reservoir rocks encountered are turbidite deposits from sheet sands to amalgamated and leveed channel systems. They are characterized by transparent seismic character that is well imaged by this pre-stack depth migrated data and are sandwiched between Cretaceous (K) carbonates and Eocene (EO) shale and limestone sequences. The St. Malo well on the left of the seismic section shows penetration through approximately 3 kilometers of salt before encountering the Lower Tertiary oil section.The Cascade and Chinook wells found hydrocarbons in salt-cored folded structural traps.

Key Geologic Sequences

The imaging of the geologic features has been accomplished by employing state of the art seismic data acquisition technology, detailed velocity modeling, and special data processing algorithm. The key geologic sequences have been identified on this seismic section by integrating a global sea level fluctuation curve andfossil records. The sequences starting from the Pliocene (SA) (approximately 7 million years) to the Cretaceous (K) (approximately 70 million years old) are annotated on the seismic section. The internal characters of the rocks between these sequences offer pertinent information on oil and gas reservoirs. The seismic section also shows shallow upper Tertiary (SB-DK) rocks where hydrocarbons have been found. The Neptune field on the northeastern side of the seismic line encountered middle and lower Miocene turbidite reservoirs in salt-cored thrust folds.

Stones

http://www.offshore-mag.com/index/article-display/332227/s-articles/s-offshore/s-volume-68/s-issue-6/s-departments/s-gulf-of-mexico/s-gulf-of-mexico.html

GULF OF MEXICO

Published: Jun 1, 2008

MMS approves Cascade, Chinook

MMS has approved development plans for Petrobras-operated Cascade and Chinook in Walker Ridge in 8,200 ft (2,499 m) of water. This project will be the first in the US GoM to use an FPSO.

The next step in the approval process is the MMS review of Petrobras’ Deepwater Operations Plan. The plan, which outlines the specific details and capabilities of the FPSO and associated new technologies, must be approved before production can begin.

Petrobras has proposed to use five new technologies in the development plan, according to the MMS. The new technologies include an FPSO with a disconnectable turret, crude oil transportation via shuttle vessels, subsea electric submersible pumps, free-standing hybrid risers (FSHR), and a polyester mooring system.

The initial development phase calls for drilling and completing two new wells on Cascade and one new well on Chinook. Subsequent development phases may require up to 24 additional wells. The wells will be tied back to a converted, double-hulled, ship-shaped FPSO via 9 5/8-in. (24.4-cm) flowlines and FSHRs. The BW Offshore-owned FPSO is designed to process 80,000 b/d of oil, store 600,000 bbl of oil, and export 16 MMcf/d of natural gas.

Produced oil will be transported to shore by shuttle vessels. Produced gas will be sent from the FPSO via FSHR and a 6-in. (25-cm) export pipeline to the BP-operated

Cleopatra pipeline system in Green Canyon block 829 or the Enterprise-operated Anaconda pipeline system in Green Canyon block 606. First production is expected in 2010.

Petrobras also is participating in two additional deepwater developments – Chevron-operated St. Malo and Shell-operated Stones. FEED work on a St. Malo and Jack joint development is expected to begin mid-year.

Petrobras is investing $4.9 billion (32% of its total investment outside Brazil) in the US through 2012.

Shell’s Perdido to push deepwater boundaries

Shell’s Perdido development will push the boundaries of deepwater development, said Lisa Johnson, Shell’s venture manager of North America Offshore, at the Offshore Technology Conference in May.

The host facility will be the deepest installed direct vertical access spar in the world, Johnson said. It will be moored on the Great White field in about 8,000 ft (2,438 m) of water.

One of the project’s subsea satellite fields (Tobago) also will represent a world record once onstream, she said. The well will be the world’s deepest subsea completion in about 9,627 ft (2,934 m) of water. Production from Tobago and planned tiebacks including Silvertip will be separated subsea and boosted to the drilling and production hub designed with capacity to process 130,000 boe/d.

Startup of Perdido, expected by the end of 2009, will represent first production from Paleogene reservoirs in the Gulf’s Lower Tertiary region, Johnson said. “Perdido will open a new era of production from the Paleogene area.”

The spar’s hull sailed from Pori, Finland on May 27, en route to Ingleside, Texas where it will be outfitted for installation. Heerema’s Thialf is scheduled to install the platform’s topside in 2009. Shell operates Perdido with a 35% working interest. Partners are BP (27.5%) and Chevron (37.5%).

Petrobras strikes oil in Lower Tertiary

Petrobras America Inc. has confirmed oil in the Stones No. 3 well operated by Shell in Walker Ridge block 508. Transocean’s semisubmersible Deepwater Nautilus drilled the well in 2,286 m (7,500 ft) of water to 8,960 m (29,396 ft) TD finding oil in multiple Lower Tertiary reserves. More drilling is planned. Partners in WR 508 are Shell (operator) with a 35% working interest, Petrobras America and Marathon with 25% each, and ENI with 15%. Deepwater Nautilus is working with Shell under

a three-year contract extension, which could be extended an additional year by June 30. At print, the semi was drilling on the Mars field in Mississippi Canyon block 807.

St Malo

Article: Devon Energy reports positive results of St. Malo appraisal well Article from:

THE JOURNAL RECORD Article date:

July 2, 2004

Devon Energy's St. Malo appraisal well encountered more than 400 net feet of oil pay at depths greater than were encountered in the discovery well, which encountered more than 450 net feet of oil pay over a gross interval of 1,400 feet.

St. Malo, drilled in 2003, is in the deepwater Gulf of Mexico on Walker Ridge block 678.

Initial evaluation of the appraisal well, about a mile east of the St. Malo discovery, indicates the field's hydrocarbon resources cover a larger area than previously indicated.

Devon said Thursday the partners will continue to evaluate the results of extensive testing carried out on the well. The evaluation will focus on productivity, the need for further appraisal ... subscription needed

http://www.advfn.com/news_Unocal-Announces-Successful-Appraisal-of-St-Malo-Discovery-in-Deepwater-Gulf-of_8084704.html

Unocal Announces Successful Appraisal of St. Malo Discovery in Deepwater Gulf of MexicoDate : 07/01/2004 @ 4:00PM

Unocal Announces Successful Appraisal of St. Malo Discovery in Deepwater Gulf of Mexico

Unocal Announces Successful Appraisal of St. Malo Discovery in Deepwater Gulf of Mexico

SUGAR LAND, Texas, July 1 /PRNewswire-FirstCall/ -- Unocal Corporation (NYSE:UCL) today said it has completed successful appraisal operations at the St. Malo hydrocarbon discovery in Walker Ridge block 678 in the Gulf of Mexico deepwater.

The appraisal well encountered more than 400 net feet of oil pay at depths greater than were encountered in the earlier discovery well in 2003.

The appraisal well results also indicate the field's potential hydrocarbon resources are greater than previously suggested by the discovery well.

Unocal is currently evaluating the results of the extensive testing program that was conducted on the well. The evaluation will focus on productivity, potential further appraisal operations and the viability of development options, with the current objective of establishing commerciality in 2005.

"Based on the quality of the test data and the increased rock volume, we intend to proceed with work to assess the potential productivity of the field and evaluate development options," said Mike Bell, Unocal's vice president for Gulf of Mexico exploration and appraisal.

The original St. Malo discovery, announced in October 2003, encountered more than 450 net feet of oil pay.

To appraise the St. Malo discovery, the company returned to the original Dana Point wildcat well, which was completed as a dry hole in early 2001. The St.

Malo appraisal well drilled to 28,903 feet, approximately 2,000 feet deeper than the original Dana Point well.

The St. Malo appraisal drilling began on May 4, 2004, and was completed in 57 days at a gross cost of $31 million. Redrilling on the Dana Point location saved Unocal and the other co-venturers an aggregate of approximately $25 million over the cost that would have been incurred by drilling a new well.

The appraisal well is located in 7,036 feet of water, approximately 6,000 feet east of the discovery well.

Unocal is the operator and holds a 28.75-percent working interest. Unocal's co-venturers in the St. Malo prospect are Petrobras (NYSE:PBR), 25 percent; Devon Energy Corporation (AMEX:DVN), 22.5 percent; ChevronTexaco Corporation (NYSE:CVX),

12.5 percent; EnCana Gulf of Mexico LLC (NYSE:ECA), 6.25 percent; ExxonMobil (NYSE:XOM), 3.75 percent; and Eni SpA (NYSE:E), 1.25 percent.

Upon completion of the St. Malo appraisal well, the Discoverer Spirit will move on to the Sardinia prospect in Keathley Canyon 681.

Jack

http://www.npr.org/templates/story/story.php?storyId=5773882

U.S. Deep-Water Oil Ready for Tapping

by Jim Zarroli

September 6, 2006

Chevron and its partners announced Tuesday that their deep-water "Jack Field" test well in the Gulf of Mexico had passed its initial production tests. The results clear the way for the development of the field's oil reserves, which could in time add substantially to known U.S. reserves.

Copyright © 2009 National Public Radio®. For personal, noncommercial use only. See Terms of Use. For other uses, prior permission required.

RENEE MONTAGNE, host:

Oil industry analysts say a well drilled deep into the floor of the Gulf of Mexico appears to herald a new U.S. energy source. A trio of oil companies led by Chevron has announced that for the first time they've successfully extracted oil from the deeper waters of the Gulf.

NPR's Jim Zarroli reports.

JIM ZARROLI: The new well is located 175 miles off shore in a part of the Gulf where the water is 7,000 feet deep. Chevron said yesterday that the well -called Jack 2 - has been producing oil at a rate of about 6,000 barrels a day.

Larry Nichols is chairman and CEO of Devon Energy, one of Chevron's partners. He pointed out yesterday that the new field is virtually in the United States' backyard.

Mr. LARRY NICHOLS (Chairman and CEO, Devon Energy): This could not have happened in a better place. The Gulf of Mexico is close to major oil and gas markets, has a favorable physical regime and has relatively less political risk than almost anyplace else in the world.

ZARROLI: But the significance of the find goes beyond this one well. Oil companies have been drilling for many years in the shallow waters of the Gulf. Until about a decade ago there was little hope of going much farther out to sea. But advances in technology have changed that. To extract oil from the Jack 2 well, Chevron and its partners drilled 20,000 feet into the sea floor.

Gary Taylor is a senior writer at Platts Oilgram News.

Mr. GARY TAYLOR (Senior Writer, Platts Oilgram News): It's been a difficult area because of the salt structures that block a clear view of what might be down there. Plus, the wells themselves are very expensive and, you know, requires partnerships among several large companies.

ZARROLI: In order to get the oil to market, pipelines will have to be built along the sea floor, and that will take several years. Despite the costs, many people in the industry believe the potential of this part of the Gulf, which is known as the lower tertiary, is huge.

Analyst David Heikkinen of Pickering Energy Partners says the region could eventually make up for the loss of production elsewhere in the Gulf.

Mr. DAVID HEIKKINEN (Managing Director, Pickering Energy Partners, Inc.): The shallower waters have produced about 27 billion barrels of oil. I think the industry estimates now are in the lower tertiary trend there is about 15 billion barrels of oil potentially there, and that'll probably increase as more wells are drilled.

ZARROLI: And even if the region produces far less oil than expected, that could still add significantly to U.S. oil production. Analyst John Kilduff of Fimat USA says the new field could be a relatively stable source of oil for the United States and could easily exceed what's extracted from Prudhoe Bay in Alaska.

Mr. JOHN KILDUFF (Senior Vice President, Energy Risk Management Group, Fimat USA Inc.): This is oil that'll come on the market, stay on the market, and not really be a source of worry for the oil markets, except subject to hurricanes.

ZARROLI: What the new field won't do is make the United States energy-independent. Even if the field produces as much as 15 billion barrels of oil during its lifetime, that's still a small fraction of world reserves. The United States alone uses almost six billion barrels of oil a year. And demand from countries like China and India is growing. That means the new field is not likely to have much of an impact on oil prices.

http://www.businessweek.com/investor/content/sep2006/pi20060908_829971.htm

SEPTEMBER 8, 2006

By Sonja Ryst

Devon's Quest for Oil Ends Well

With a major Gulf discovery, the Oklahoma energy company's production prospects have shot up, validating its shift from M&A to exploration

Devon Energy's (DVN) J. Larry Nichols claims to have gotten religion—mergers and acquisitions aren't the only way to grow in the energy industry.

Unlike his custom in the late 1990s, the 64-year-old has been focusing his Oklahoma City company on locating new North American discoveries in recent years rather than gobbling up existing ones. Nichols' new approach appears to be working after news on Sept. 5 that Devon, Chevron (CVX), and Statoil (STL) announced drilling-well test results that showed they can commercialize recent discoveries in the lower tertiary Gulf of Mexico, a deep layer of ancient rock that lies five miles below the ocean's surface. The "Jack 2" well, 175 miles off the Louisiana coast, had a flow rate of more than 6,000 barrels per day.

Before the latest find, the Gulf's declining production prospects had been long known and well-chronicled. And even though no production is expected at the site for several years, the discovery could spell good news for the U.S. oil supply (see BusinessWeek.com, 9/7/06, "Plenty of Oil—Just Drill Deeper"). Depending on how drilling wells develop, the new field could boost the country's total reserves by more than 50%. However, during a conference call related to the announcement, Devon officials conceded abundant "variability" in estimates implying that new discoveries in the area could yield as many as 20 million barrels.

Nichols feels his company's exploration efforts have been vindicated by the news. "With the announcement (on Sept. 5), it clearly has been (worth it) and will be for some time," Nichols said in an interview. "We don't need to do large M&A to be successful." He's quick to add that any such statement doesn't mean he'll never do another deal, however.

BARRELS OF POTENTIAL.  Investors bid up Devon more than 12% on news of the find, with the stock hitting a 52-week high of $74.75 on Sept. 5. The shares are up more than 13% over the past year and finished at $69.86 on Sept. 7.

To be sure, Devon is far from the only player prospecting for oil in the Gulf's deepest realms. Chevron, the San Ramon (Calif.) integrated oil major, is operating the Jack prospect with a 50% working interest, while Devon and Norway's integrated giant Statoil each own 25%. Chevron has had a stake in six discoveries in the lower tertiary, or around half the total, while Devon has four. What differentiates Devon from the pack? Its smaller size, independence, and tight focus on gas production in North America.

"Successful companies need to explore," Merrill Lynch (MER) analyst John Herrlin Jr. said in a Sept. 5 research note. He later added that investors now need to recognize the growth potential of Devon's reserves. Devon's four discoveries in the area could represent up to 900 million barrels of net resource potential. Meanwhile, the company's total reserves amounted to 2.1 billion barrels at the end of 2005.

The company has also spent about 25% of its exploration and development budget on exploration, putting its efforts in this area ahead of most. Energy companies have seen exploration projects fail in recent years, as their rivals outperform by buying others'

existing reserves. As a result, last year only 22% of independents' worldwide exploration and development spending went toward the former. Back in 1998, exploration accounted for 38% of spending, according to Bank of America.