Newfield Exploration Co. said Monday that it received notice from BP Exploration & Production Inc. of its intent to drill an initial deep shelf well in the Gulf of Mexico to test the companies’ Treasure Island subsalt exploration concept.

The Interior Department’s Minerals Management Service recently said that it believes there is about 20 Tcf of undiscovered gas in deep formations in the shallow water areas of the Gulf. The MMS also is providing roaylty relief on production from these areas (see Daily GPI, March 27)

The plan is to explore for oil and gas in ultra-deep horizons below the salt and typically about 18,000 feet but sometimes as deep as 22,200 feet. The Treasure Island area covers horizons below specified depths in 116 lease blocks located offshore Louisiana.

Newfield noted that there is no production and there are no proved reserves currently associated with Treasure Island and no wells have yet been drilled to test the exploration concept..

Under the Treasure Island agreement, BP must commence drilling of the initial well by Jan. 1, 2004 or the agreement will terminate and the interests in the 20 leases assigned to BP under the agreement will be reassigned to Newfield for nominal consideration. The companies said they are currently conducting further technical work to refine plans for the area.

A little over a year ago, Houston-based Newfield pumped up its core South Texas natural gas assets and more important, moved into the deepwater of the Gulf of Mexico, with the acquisition of cross-town peer EEX Corp. (see Daily GPI, May 31, 2002). The transaction was valued at $640 million, including debt.

Through the EEX purchase, Newfield, which already was dominant along the Outer Continental Shelf, gained a foothold in deeper water, picking up 68 lease blocks, most of which EEX was exploring with Shell Oil Co.

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