In what may be one of the biggest oil and gas finds in the Gulf of Mexico (GOM) in a decade, BP plc last week announced a “giant” discovery in the promising Lower Tertiary trend, a find that analysts said will reaffirm the importance of the U.S. offshore to domestic energy supplies.

New technologies are enabling producers to find more oil and gas at deeper depths than ever before, a BP spokesman told NGI. The Tiber well, which is near BP’s promising Kaskida well, may be the “deepest well ever drilled by the oil and gas industry,” he said. The Kaskida well contains an estimated 3 billion boe in place, and if Tiber proves its worth, the two discoveries alone could increase BP’s GOM output by more than 60% to 650,000 boe/d within the next 15 years, the spokesman said.

“These material discoveries, together with our industry-leading acreage position, support the continuing growth of our deepwater Gulf of Mexico business into the second half of the next decade,” said Andy Inglis, who helms BP’s exploration and production business.

The Tiber well, completed in August, is in Keathley Canyon Block 102. The well is about 250 miles southeast of Houston in 4,132 feet (1,259 meters) of water. The well was drilled to a total depth of 35,055 feet (10,685 meters), which, to put in perspective, is deeper than Mount Everest is tall. The London-based producer operates Tiber and holds a 62% stake; Brazil’s Petroleo Brasilerio SA (Petrobras) has a 20% interest and ConocoPhillips holds an 18% stake.

Technical estimates of Tiber are ongoing, and it’s too early to estimate the resources in place, said the BP spokesman. The oil discovered in Tiber is light, which indicates a higher recovery rate, according to BP. Based on an estimated 20-30% recovery rate, Tiber may have recoverable reserves of 600-900 million boe.

Even if the reserves numbers are high, the Lower Tertiary trend will take years to develop. BP owns almost 74% of the Kaskida discovery; Devon Energy Corp. owns the remaining interest (see NGI, April 28, 2008). Devon officials in August said appraisal drilling operations were under way at Kaskida; total drilling depth is expected this month (see NGI Aug. 10). An additional well at the Kaskida discovery is being considered for next year, according to Devon.

Some pundits think there’s a chance the Tiber discovery is as big — or bigger — than BP’s deepwater jewel, Thunder Horse. If that is the case, “repeating that kind of find is the holy grail” for BP, said ING analyst Jason Kenney. The Thunder Horse field platform, about 140 miles southeast of New Orleans, is tethered to the sea floor in 6,000 feet of water. The field ramped up last year following a three-year delay (see NGI, June 23, 2008).

Thunder Horse currently is producing 300,000 boe/d, including 200 MMcf/d, which makes it the No. 2 production area in the United States after Alaska’s Prudhoe Bay. ExxonMobil Corp. owns a quarter stake.

“Any announcement of a discovery by a major means it’s important,” said UBS AG analysts. “Using the word ‘giant’ is almost unprecedented. From memory the last time something like this was announced it was Thunder Horse, which is more than 1 billion bbl. The previous discovery in the Lower Tertiary Kaskida was more than 3 billion bbl in place and more than 300-500 million bbl recoverable with significant upside. So this sounds like a 500 million-1 billion bbl discovery and with Kaskida, the opening up of a whole new geological play.”

BP officials said technologically, Tiber was “within the envelope,” which indicates “big advantages of critical mass,” said UBS. “GOM oil discoveries are the highest value globally so this is a big positive — probably worth at least 3% even to a company the size of BP.”

BP’s GOM portfolio is estimated at around 550 leases. It already is the largest oil and natural gas producer in the GOM, with net production of more than 400,000 boe/d. BP estimates that it has partnered on nearly a third of all the large fields in the GOM over the past 10 years.

Including Kaskida, the producer is partnering on nine GOM projects in the development stages: Atlantis Phase 2, Tubular Bells, Kodiak, Freedom, Isabela, Santa Cruz, Mad Dog tiebacks and Great White. In July BP said it had “firmly established” the Mad Dog field as the third giant field in its GOM portfolio (see Daily GPI, July 20). Mad Dog is in Green Canyon block 826 about 100 miles south of Grand Isle, LA.

The latest deepwater success fuels enthusiasm — and money — in the GOM. Last year the Minerals Management Service said the deepwater GOM — defined as waters at least 1,000 feet deep — was responsible for producing 72% of the total offshore oil and 38% of the total offshore natural gas (see NGI, May 12, 2008). Production gains in the offshore also are said to be fueling a push by some groups for offshore drilling in prohibited U.S. areas (see related story).

The deepwater GOM “is and will continue to be one of the most important areas for the production picture” in the United States, according to MMS. In 2007 54% of all GOM leases were located in waters 1,000 feet deep or more. In July 2007 there were a record 15 rigs drilling in GOM waters 5,000 feet or deeper. By comparison, there was one well drilled in water 7,500 deep in 1998, and in 2000, there were nine wells drilled in waters 7,500 feet deep or more.

The GOM is the go-to destination for producers unable to tap resources in the Middle East and Russia, according to Wood Mackenzie Ltd. analysts.

“If you are looking for another opportunity of that scale…the Santos Basin of Brazil is the only other one in the world,” according to Wood Mackenzie. Producers also pay the United States less in taxes and royalties to drill in the GOM compared with other governments, said the analyst. The Tiber discovery “is definitely good news for the Gulf…When a supermajor like BP uses a term like ‘giant’ to describe a discovery, people sit up and take notice.”

The first Lower Tertiary production is expected to come in the next few months from the Perdido Development, in which Shell Exploration and Production holds a 35% stake and operates on behalf of BP (27.5%) and Chevron Corp. (37.5%). The facility, which is said to be as tall as the Eiffel Tower, is in the deepest waters of any such facility in the world at around 7,300 feet (see NGI, June 8). By the middle of 2010, Petrobras is expected to begin production from the Cascade-Chinook floating production storage offloading facility in the Lower Tertiary (see NGI, June 29, May 5, 2008).

“If anyone was under the impression that the Gulf of Mexico was done, they should change that impression,” said Shell’s Marvin Odum.

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