In a positive turn less than two weeks after federal officials lifted the offshore drilling moratorium, Chevron Corp. on Thursday sanctioned the long-awaited Jack/St. Malo project, a promising project that it would operate in the Lower Tertiary trend in the deepwater Gulf of Mexico (GOM).

When the massive project ramps up, which is anticipated in 2014, it is expected to produce up to 42.5 MMcf/d of gas and 170,000 b/d of oil. The oil production alone would more than double Chevron’s average net production in the GOM. In 2009 the producer’s GOM projects produced a total of 484 MMcf/d of gas, 149,000 b/d of crude oil and 14,000 b/d of natural gas liquids.

The Jack and St. Malo fields, which are about 25 miles apart in the deepwater, are estimated to contain more than 500 million boe of combined total recoverable resources. The Jack and St. Malo fields are about 280 miles south of New Orleans, both in 7,000 feet-plus of water. Initial development is expected to require an investment of $7.5 billion.

“Jack/St. Malo is the latest example of Chevron advancing its industry-leading queue of major capital projects,” said Vice Chairman George Kirkland. “The Lower Tertiary is recognized as a huge resource with the potential for long life projects of up to 30 to 40 years and the opportunity to enhance recoveries through technology.”

In the past seven years seven exploration and appraisal wells have been “successfully and safely drilled” at these fields, Chevron noted. Through its subsidiary Chevron U.S.A. Inc., the producer holds a half-stake in the Jack field, a 51% stake in the St. Malo field, and 50.67% interest in the planned host facility.

“The Jack/St. Malo project builds off our success in the U.S. Gulf of Mexico and will enable Chevron to help meet future U.S. energy demand while delivering a safe and reliable deepwater operation,” said Gary Luquette, president, Chevron North America Exploration and Production Co.

The sanctioned development, he said, “is another step in our efforts in the development of the Lower Tertiary trend. We have an operating interest in the 2009 Buckskin discovery and participate in the Perdido Regional Development, which provide significant learnings we can apply to Jack/St. Malo.”

Royal Dutch Shell plc’s Perdido development, which ramped up this year (see NGI, April 5), was the first producing platform sanctioned in the Lower Tertiary. Considered the world’s deepest offshore drilling and production facility, Perdido is able to produce more than 200 MMcf/d of gas and 100,000 b/d of oil.

In September 2006 Chevron and its partners at the time, Devon Energy Corp. (25%) and Statoil ASA (25%) completed the first successful production test on the Jack No. 2 well in the Walker Ridge Block 758 of the Lower Tertiary (see NGI, Sept. 11, 2006). The tests at the time broke Chevron’s 2004 Tahiti well test record in the deepwater GOM. Devon last year sold its quarter interest in the project to Denmark’s Maersk Oil (see NGI, Jan. 4).

Earlier this year Enbridge Offshore Pipelines secured two ultra-deepwater developments in the GOM, including the $500 million Walker Ridge Gas Gathering System, which would process gas from the deepwater Jack, St. Malo and Big Foot fields (see NGI, Feb. 8).

©Copyright 2010Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.