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Chevron-led trio reports oil find near Louisiana

"It's a nice positive, but the US still has a big difference between its consumption and indigenous production."

Art Smith, chief executive of energy consultant John S. Herold

A trio of oil companies led by Chevron Corp has tapped a petroleum pool deep beneath the Gulf of Mexico that could boost the US reserves by more than 50 percent. A test well indicates it could be the biggest new domestic oil discovery since Alaska's Prudhoe Bay a generation ago.

But the vast oil deposit roughly 6.4km beneath the ocean floor will not significantly reduce the country's dependence on foreign oil and it won't help lower prices at the pump anytime soon.

"It's a nice positive, but the US still has a big difference between its consumption and indigenous production," said Art Smith, chief executive of energy consultant John S. Herold. "We'll still be importing more than 50 percent of our oil needs."

Chevron on Tuesday estimated the 777km2 region where its test well sits could hold between 3 billion and 15 billion barrels of oil and natural gas liquids. The US consumes roughly 5.7 billion barrels of crude oil in a year.

It will take many years and tens of billions of dollars to bring the newly tapped oil to market, but the discovery carries particular importance for the industry at a time when Western oil and gas companies are finding fewer opportunities in politically unstable parts of the world, including the Middle East, Africa and Russia.

The proximity of the Gulf of Mexico to the world's largest oil consuming nation makes it especially attractive. And it could bring pressure on Florida and other states to relax limits they have placed on drilling in their offshore waters for environmental and tourism reasons.

The country's reserves currently are more than 29 billion barrels of oil equivalent, according to the US Energy Department. But the US imports most of its oil from abroad and its overall supply is tiny when compared with, say, Saudi Arabia, whose reserves exceed 250 billion barrels.

Chevron's well, called "Jack 2," was drilled about 8.5km below sea level.

The well was drilled in the Walker Ridge area of the Gulf, about 434.5km southwest of New Orleans and 282km off the coast of Louisiana. It followed up a discovery made by Chevron in 2004.

San Ramon, California-based Chevron said the well set a variety of records, including the deepest well successfully tested in the Gulf of Mexico. Chevron said the well was drilled more than 6,096m under the sea floor below 2,134m of water for a total depth of 8,599m.

Chevron has a 50 percent stake in the field, while partners Statoil ASA of Norway and Devon Energy Corp of Oklahoma City own 25 percent each.

During the test, the Jack 2 well sustained a flow rate of more than 6,000 barrels of oil per day, but analysts and executives believe the payoff could be much larger than that.

The successful test well does not mean a huge supply of cheap oil will hit the market anytime soon.

Oppenheimer & Co analyst Fadel Gheit estimated that the first production for the Chevron-led partnership might not come on line until after 2010, depending on how many more test wells the companies drill.

That said, many companies stand to benefit from their own projects in the so-called lower tertiary, a rock formation that is 24 million to 65 million years old.
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