An oil and gas discovery in the Lower Tertiary trend of the deepwater Gulf of Mexico (GOM) may be as good — or better — than the ballyhooed deepwater Jack prospect, Chevron Corp. said Thursday.

The Buckskin prospect is about 190 miles southeast of Houston. The Buckskin No. 1 discovery well, located in 6,920 feet of water, encountered 300 feet of net pay, Chevron said. The well was drilled to a depth of 29,404 feet. More tests are being conducted on data gathered from the discovery well, and additional work at the prospect, located in Keathley Canyon Block 872, is needed to determine the extent and commercial viability of the discovery, the company said.

The discovery is said to be similar to the Jack prospect, located in Walker Ridge Block 758 of the Lower Tertiary. Jack is about 44 miles to the east of the Buckskin well. The Jack well test completion, announced in September 2006, was called one of the most significant discoveries in the GOM deepwater to date (see Daily GPI, Sept. 6, 2006). Chevron holds a 50% stake in Jack and operates the well; both Devon Energy Corp. and StatoilHydro hold 25% stakes.

The entire Lower Tertiary trend, which is around 300 miles wide, previously was estimated to hold 3-15 billion boe of crude and natural gas reserves. The Jack prospect was the first indication that producers might be able to tap the formation.

Chevron, which holds a 55% stake in the Buckskin well, will take over as operator. Maersk Oil America owns a 20% stake, while both Spain’s Repsol YPF SA and Samson Offshore Co. hold 12.5% stakes. No cost estimate or target was provided to develop the prospect; more drilling is required to assess the field, Chevron said.

The prospective Lower Tertiary trend of the deepwater GOM is but one area drawing the interest of wildcatters worldwide, according to a report by UK-based energy analyst Douglas-Westwood. In its World Deepwater Market Report 2009-2013, the analyst predicted that worldwide, deepwater sector operators will spend $162 billion between now and 2013.

“Overall, despite more moderate levels of expenditure during 2009 and 2010 relative to 2008, the deepwater sector is forecast to continue its growth trend, with annual expenditure reaching over $35 billion by 2013,” said Douglas-Westwood’s Steve Robertson, who manages the company’s oil and gas unit.

Most of the deepwater prospects are being explored by the majors and “well placed national oil companies that we believe will not be hit by the economic downturn and turmoil in the debt markets to the same extent as most smaller players,” said Robertson. “We accept, however, some impact on the sector may be felt through those deepwater operators that are reliant on external project finance. The result is that some delays to projects are inevitable until the financial markets become more settled.”

For now, “oil prices appear to be less of an issue,” said Robertson. “Our survey of deepwater operators indicates that most are planning against conservative assumptions and expect oil prices to recover to $50-70/bbl in the medium-term.”

Douglas-Westwood’s Thom Payne said the “golden triangle” of the deepwater, “namely Africa, the Gulf of Mexico and Brazil, will account for nearly 75% of global expenditure. For Africa, a large number of world-class developments are under way or planned for the forecast period and valued at $60 billion. North America, which in deepwater terms means the U.S. Gulf of Mexico, is set for substantial spend with $29.3 billion forecast for the 2009-2013 period…”

According to Payne, “three main elements dominate spend over the forecast period, namely: pipelines, the drilling and completion of development wells, and platforms. Pipelines and control lines will continue to play a vital role in providing the necessary infrastructure for deepwater developments.”

The discovery of new resources “further from the coast and the incorporation of satellite fields into deepwater hubs will drive expenditure with a total forecast spend of $57.7 billion,” Payne said. “Expenditure on the drilling and completion of subsea development wells will amount to $53.8 billion. These two components of activity account for nearly 70% of all expenditure. The number and cost of deepwater floating production platforms is also set for major growth, with a total of 86 units forecast at a cost of $38.2 billion.”

Douglas-Westwood said there is a “positive outlook” going forward for the deepwater players.

“Ultimately,” said Payne, “this is where the majors need to play to secure significant reserve replacement and incremental production and there are simply not enough world-class opportunities elsewhere. We believe those that are currently active in this sector are most sheltered from the financial and economic turmoil and that as a result the sector will continue to be a promising long-term business area throughout the oil sector value chain.”

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