Chevron strikes black gold in the Gulf of Mexico

[mustang84]

Chevron hits oil in major Gulf of Mexico well

Tue Sep 5, 2006 10:35 AM EDT

By Mark McSherry

NEW YORK (Reuters) - Three oil companies, led by Chevron Corp. (CVX.N: Quote), have successfully drilled for oil in the Gulf of Mexico's deep waters, suggesting there may be more oil in the region that already provides a quarter of U.S. output, the companies said on Tuesday.

During the test, at record depths and pressure, the Jack No. 2 well flowed at a rate of more than 6,000 barrels of crude per day, Chevron said. That puts it on a par with discoveries in exploration hot spots such as the waters off Angola.

With U.S. oil output in decline, big new fields are increasingly rare and oil companies are widening their search to more difficult places. Chevron, the No. 2 U.S. oil company, did not give an estimate of the field's reserves.

Chevron is the operator of the Jack prospect with a 50 percent working interest. Devon Energy (DVN.N: Quote) and Norway's Statoil (STL.OL: Quote) each own a 25 percent working interest.

"This is very important for Chevron, but it is more important for its other partners -- pound-for-pound, Devon gains a lot more than Chevron," said Oppenheimer & Co. analyst Fadel Gheit.

"Chevron has double the interest, but it is five times the size of Devon. So if I were betting, I'd put my money on Devon, not on Chevron."

Devon said its holdings in the lower-tertiary region of the Gulf of Mexico -- a bed of ancient rock deep under water -- could more than double its current reserve base of about two billion equivalent barrels in the coming years.

Chevron shares rose 2.7 percent and Devon shares rose 2.3 percent before the opening bell.

Chevron officials estimate the lower-tertiary region could hold 3 billion to 15 billion barrels of oil and gas reserves, according to The Wall Street Journal. The high end of that range would boost U.S. current reserves by 50 percent.

"This region is proving quite prospective. Certainly, the test well results are on the top end of most analysts' ranges," said Jason Kenney, an analyst at ING in London.

Mike Wittner of investment bank Calyon cautioned that until the size of the field is known, it will be difficult to draw conclusions.

He added, "It seems to be a significant find and there is still life left in the deepwater Gulf of Mexico, particularly as you move into ultra-deep water."

"The results of the Jack test allow Chevron and its co-owners to better understand the deliverability of the emerging lower-tertiary trend, a trend where Chevron is the largest leaseholder," said Gary Luquette, Chevron's president, North America Exploration and Production.

Chevron was not immediately available for further comment.

Chevron first announced the discovery of the Jack prospect in September 2004. It is 270 miles southwest of New Orleans and 175 miles offshore.

Chevron said the Jack well was completed and tested in 7,000 feet of water, and more than 20,000 feet under the sea floor, breaking Chevron's 2004 Tahiti well test record as the deepest successful well test in the Gulf of Mexico.

The Jack No. 2 well was drilled to a total depth of 28,175 feet.

More than half a dozen world records for test equipment pressure, depth, and duration in deepwater were set during the Jack well test, Chevron said.

Chevron and its co-owners plan to drill an additional appraisal well next year.

Chevron said it is the largest lease holder in the deepwater Gulf of Mexico and is currently developing the $3.5 billion Tahiti project, scheduled to commence production in 2008.

Reuters

[trinacriabob]

Great! This is good news. Still:

IT'S NOT A REASON TO WASTE IT!!!

I've been to a lot of seminars on "green" buildings right now. Just because resources are here doesn't mean we shouldn't think about future generations. We need to be moving to other energy sources, particularly in our automobiles. I'll buy another 3800 equipped vehicle, or some facsimile thereof, but, after that, I want an alternative vehicle (hybrid, etc).

We need to deal OPEC the hand they've been deserving all along!

[Cadillacfan]

Yet, I bet you that the gas prices will still stay above the $2 mark just to "play it safe". Big oil will be the death of this country.

[mustang84]

Great!  This is good news.  Still:

IT'S NOT A REASON TO WASTE IT!!!

I've been to a lot of seminars on "green" buildings right now.  Just because resources are here doesn't mean we shouldn't think about future generations.  We need to be moving to other energy sources, particularly in our automobiles.  I'll buy another 3800 equipped vehicle, or some facsimile thereof, but, after that, I want an alternative vehicle (hybrid, etc).

We need to deal OPEC the hand they've been deserving all along!

189767[/snapback]

True...I hope we don't revert back to our old ways, instead using this as a true reserve while continuing to push the alternative energy envelope. I think American attitude toward SUVs and Big Oil has changed enough that we aren't going to pull a 1990s all over again.

[razoredge]

Thats great, now we can all have 9 litre V16 AWD Hemi Vortec twin turbo way tight whips..................................... Im with Bob

I wish I could understand what made this oil, 5 miles below the surface of the sea ? Im thinking one of those Greek Gods must have been the God of Oil and went about injecting his majic rod deep into the surface of the earth.

Well it is good news but it will make America loose site of reality again.

[capriceman]

woohoo. time to buy a 572 truck. 8 barrel carb. 3-4 miles per gallon with about 826 hp. Im so happy time to drive the caprice and the truck around. sell the Vibe (yes).

[bowtie_dude]

Hey, I betcha gas prices won't go down.

[Sixty8panther]

I think I'll drop a twin turbo Nelson Racing 572 BBC in the Datsun.

[Drew Dowdell]

betcha gas goes UP 50 cents a gallon..."to cover the cost of drilling"

[FAPTurbo]

Maybe we'll be getting more of these ads from the CEI!

Oh and keep in mind some enviro group posted these, so ignore the red banner.

CEI Ad. YouTube Link.

The first ad made me laugh my balls off so hard when I saw it on TV, I now have to sit on the Toilet.

Edited September 6, 2006 by Captainbooyah

[Chris_Doane]

It's great that they found it, but this new oil wont be on the market for 3-5 years.

[mustang84]

Maybe we'll be getting more of these ads from the CEI! 

Oh and keep in mind some enviro group posted these, so ignore the red banner.

CEI Ad. YouTube Link.

The first ad made me laugh my balls off so hard when I saw it on TV, I now have to sit on the Toilet.

189936[/snapback]

The oil industry is hilarious.

Ironically, I just read a thread the other day about how Greenland is warming up enough that trees will soon be able to grow along the coast and the farming season has been extended by two weeks over the last decade or so.

Global Warming a Boon for Greenland's Farmers

[FAPTurbo]

Ok... I know I'm not some tree-hugging hippie, but that's intimidating...

[regfootball]

elections are coming up then soon, no?

[Turbojett]

what's it matter? the Man still isn't going to let us use it.

[Nick]

Hey, I betcha gas prices won't go down.

189900[/snapback]

I'm actually suprised...gas prices have been dropping around here lately...gone down atleast 30-50 cents...

[pow]

Yeah. $3.25/gallon for premium. Score!

[ocnblu]

I paid $2.55 for regular on sunday. Haven't seen it that low for a good while.

[Derek77]

Hold on a minute. So the profits that the oil companies made is going to toward finding more oil and not just making money? And when they find the oil, they are going to build a platform there to get the oil out? How much does that cost? Millions? Billions? Isn't that amazing how that works? You bring a product to market and, *gasp*, make a profit, and use that profit to fund your company and to explore for more of your product. I thought they just liked screwing us over. Go figure.

My gas prices are down to the 2.30 today, not to brag or anything. Doesn't really matter. I'm going to get it anyways if I need it.

Edited September 6, 2006 by Derek77

[Drew Dowdell]

Hold on a minute. So the profits that the oil companies made is going to toward finding more oil and not just making money? And when they find the oil, they are going to build a platform there to get the oil out? How much does that cost? Millions? Billions? Isn't that amazing how that works? You bring a product to market and, *gasp*, make a profit, and use that profit to fund your company and to explore for more of your product.

The retail price of gasoline rose disproportionally to the price of crude oil.

I thought they just liked screwing us over. Go figure.

190037[/snapback]

well.... they do.

[CARBIZ]

They also control the refinery capacity of North America, which is another choke point. There is a certain conflict of interest here because every year we hear there are shortages of heating oil/gasoline because of refinery capacity; yet, if they build new refineries (not cheap) their prices will naturally go down as capacity increases. If you were CEO of Exxon, Chevron, etc. would you spend a billion dollars on a new refinery if you knew your prices would drop afterward?

[Derek77]

The retail price of gasoline rose disproportionally to the price of crude oil.

well.... they do.

190043[/snapback]

I'm lazy. I don't feel like looking it up. Show me some figures or something that backs up what you are saying.

[Derek77]

They also control the refinery capacity of North America, which is another choke point.  There is a certain conflict of interest here because every year we hear there are shortages of heating oil/gasoline because of refinery capacity; yet, if they build new refineries (not cheap) their prices will naturally go down as capacity increases.  If you were CEO of Exxon, Chevron, etc. would you spend a billion dollars on a new refinery if you knew your prices would drop afterward?

190045[/snapback]

Let's see. If I was a CEO of a car company and we had the capacity to make 1 car a year at a cost of 1 million dollars. But everyone wanted that one, so I WILL at least consider expanding our capabilites of turning out 2 cars a year, but, if I do that, the price will fall by 25%. What should I do?

And how would I know if the popularity of my car won't fade, then I'm stuck with a bill of the increased capacity, but turning out 1 car again at a lower price. That's not smart!

[Chris_Doane]

I'm lazy. I don't feel like looking it up. Show me some figures or something that backs up what you are saying.

190047[/snapback]

Hahah, yes, thats the way to get someone to help you.

Edited September 6, 2006 by CD/BP

[CARBIZ]

........oh, PUHLEAZE...like the demand for oil is ever going to go DOWN in North America! Population growth alone will push up demand, even if conservation measures are increased. Meanwhile, if they can bitch that "due to high gasoline demand over an unusually hot summer driving season, we have been unable to switch to heating oil refining in time, therefore, heating oil prices will rise" or "due to an unusually cold winter, we have been unable to switch to gasoline refining in time, therefore, gasoline prices will rise for the busy summer driving season."

Take your pick, we hear it almost every year.

[Drew Dowdell]

Let's see. If I was a CEO of a car company and we had the capacity to make 1 car a year at a cost of 1 million dollars. But everyone wanted that one, so I WILL at least consider expanding our capabilites of turning out 2 cars a year, but, if I do that, the price will fall by 25%. What should I do?

And how would I know if the popularity of my car won't fade, then I'm stuck with a bill of the increased capacity, but turning out 1 car again at a lower price. That's not smart!

190051[/snapback]

your situation only works in a monopoly or oligopoly.

when you have many competitors there is less chance for price alignment

There are, what, 5 major producers?

this is also a lesson in why oil company mergers are bad

[bowtie_dude]

I'm actually suprised...gas prices have been dropping around here lately...gone down atleast 30-50 cents...

189986[/snapback]

$2.34 for 87 in Lexington.

[XM DUDE]

I bet a couple of refineries go down and the price jumps to $4.00 a gallon as they will not give up profits.

[sciguy_0504]

Hold on a minute. So the profits that the oil companies made is going to toward finding more oil and not just making money? And when they find the oil, they are going to build a platform there to get the oil out? How much does that cost? Millions? Billions?

190037[/snapback]

I'd say at least $10 billion to search for the oil, construct a rig, install the rig and needed infrastructure improvements, and begin extracting the black gold. Something tells me that's being conservative, though.

[Drew Dowdell]

I'd say at least $10 billion to search for the oil, construct a rig, install the rig and needed infrastructure improvements, and begin extracting the black gold.  Something tells me that's being conservative, though.

190204[/snapback]

That means they'd need 1,428,571,429 barrels of oil to make up that cost at todays prices.

This discovery will yield them 3,000,000,000 to 15,000,000,000 barrels of oil.

[regfootball]

I bet a couple of refineries go down and the price jumps to $4.00 a gallon as they will not give up profits.

190163[/snapback]

that will happen the thursday after election day

[regfootball]

I'd say at least $10 billion to search for the oil, construct a rig, install the rig and needed infrastructure improvements, and begin extracting the black gold.  Something tells me that's being conservative, though.

190204[/snapback]

thought brought in carlos ghosn and he asked them to do it for 5 billion or less

[XM DUDE]

The prices will go down a bit for the elections to make it look like the government is keeping the oil companies in line, then back to normal($3.00+). I'm all for E85.

Edited September 7, 2006 by XM DUDE