PanCanadian Petroleum subsidiary PanCanadian Gulf of MexicoInc., made a deep-water oil and gas discovery in the Gulf of Mexicothat it likened to Shell’s prolific Auger Field. The Llanodiscovery well, in Garden Banks Block 386 about 137 miles offshoreLouisiana, drilled to a record depth for the Gulf of 27,864 feet.The sands at Llano correlate closely to similar sands encounteredby Shell Deepwater Development in the Auger Field, less than 15miles to the southwest, containing a reported 220 million barrelsof oil equivalent reserves. Auger has reported reserves of 220million Boe with approximate production of 100,000 barrels of oiland 300 MMcf of gas per day.

“This sets the stage for additional drilling on the significantlands we hold in the deep-water,” said Gerry Macey, PanCanadiansenior vice president for exploration. “This well proved to behighly challenging and has stretched the envelope of drilling inthe Gulf of Mexico’s deep-water. It opens a new exploration anddevelopment frontier for PanCanadian.”

The drilling of Llano, in about 2,700 feet of water, initiallyreached a depth of 25,340 feet when drilling was suspended due torig limitations. In April, the larger-capacity Sedco Omega rigresumed drilling to make Llano the deepest well drilled in the Gulfto date. The depth of the pay intervals also makes Llano thedeepest hydrocarbons discovered in the Gulf.

Currently the well is undergoing final evaluation before casing,and partners are investigating appraisal and production scenarios.An appraisal well on the Llano prospect is planned for later thisyear. PanCanadian holds a 20% interest in this discovery and 20% to25% working interest in three additional blocks adjacent to Llano.The other partners in the Llano well are the operator, EEX Corp. ofHouston with 30%, Enterprise Oil of London with 30%, and MobilCorp. of Fairfax, VA, with 20%.

Core samples, pressures and fluid samples at depth will becaptured, in addition to electric logs, and will be used toevaluate the feasibility of early production through tie-backoptions to EEX’s Cooper Facility on Garden Banks Block 388concurrently with evaluations for stand-alone productionfacilities.

The Cooper facility can handle 120 MMcf/d of gas and 40,000 b/dof crude. EEX spokesman John MacDonald said the facility’s capacitycould be expanded by removal of a drilling rig and addition ofprocessing infrastructure. This would add about 30% to itscapacity.

MacDonald said the first appraisal well could be finished by theend of the year and a decision on whether to make an early tie-backto Cooper won’t be made until sometime in the first half of nextyear. The company might opt to tie-back one or two appraisal wellsto Cooper to generate early cash flow before a stand-aloneproduction facility is installed. Gas leaving the cooper facilityflows on an EEX line which is connected to a shallow water facilityat Eugene Island.

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