New oil discovery in Gulf of Mexico

September 2, 2009 4:54:44 PM PDT
British oil company British Petroleum (BP) announced the discovery of a vast pool of crude oil Wednesday. The Tiber Prospect is expected to be one of the largest petroleum discoveries in the United States with an estimated four to six billion barrels of oil. That could power the entire U.S. for a year. The location of the find could transform the oil industry.

BP says it made the discovery with this semi-submersible rig called the Transocean Deep Water Horizon. It was drilling about 250 miles southeast of Houston in an area of the Gulf called Keathley Canyon.

"This is a good indicator. A very good indicator and something we should all be excited about," said Paul Hillegeist, President of Quest Offshore.

Hillegeist runs an offshore oil and gas research and consulting firm that predicted the potential value of the deepest waters in the Gulf.

"We are looking at significant growth potential in this area. Potentially more finds," said Hillegeist.

The find is almost impossibly deep. BP reports it as being more than 35,000 feet below the Gulf's surface. That's more than a mile deeper than Mount Everest is tall. It's called the Lower Tertiary, a part of the Gulf about the size of West Virginia that is the current and next frontier in domestic production.

"It's a very complex environment with a lot of challenges. It's requiring significant capital investment to explore and exploit these potential giant reserves," said Hillegeist.

By significant capital, Hillegeist means the cost of drilling a single well in ultra deep water can run as much as $150 million. To bring it to production in the next decade would run at least another $5 billion, but deep water is where exploration is now focused.

Hillegeist also says that BP is gambling that there is even more oil in the Lower Tertiary, paying $28 million for a block of ocean floor not far from the announced find.

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