- The Washington Times - Thursday, September 3, 2009

A “giant” discovery that may hold more than 3 billion barrels of oil was reported Wednesday by BP PLC after the London-based company drilled the world’s deepest exploration well in the Gulf of Mexico.

The well is at the Tiber Prospect about 250 miles southeast of Houston, BP said. It was drilled to about 35,055 feet, greater than the height of Mount Everest.

The latest discovery will help BP, already the biggest producer in the Gulf of Mexico, boost output in the region by 50 percent to 600,000 barrels of oil equivalent a day after 2020. It’s equal to about a year’s output from Saudi Arabia, the biggest exporter in the Organization of Petroleum Exporting Countries, and comes close to matching Britain’s entire proven reserves.

“It will take a while to develop, the second half of next decade, but it’s very important,” Jonathan Rigby, an analyst at UBS AG in London, said in a telephone interview.

BP, led by Chief Executive Officer Tony Hayward, is developing nine projects in the Gulf of Mexico and overtook Royal Dutch Shell PLC in terms of output in the region after ramping up the Thunder Horse platform to more than 300,000 barrels of oil equivalent a day.

Mr. Hayward, who took over as CEO from John Browne in May 2007, is boosting production growth after delays at projects including Thunder Horse led to an operational gap with rivals. BP has a history of pushing back the frontiers of exploration in North America, and pioneered enhanced oil recovery techniques in Alaska.

Oil companies have been increasingly turning to more technically challenging fields as oil-rich nations limit access. Tiber will help allay concerns over BP’s growth prospects given its reluctance to invest heavily in unconventional projects, such as oil sands in Canada, to replenish reserves as maturing fields age.

“What today’s announcement proves is that BP is a very, very successful explorer,” Irene Himona, an oil and gas analyst at Exane BNP Paribas, said by telephone. “They’ve opened up the whole area for discoveries.”

Other major finds by the oil industry in recent years include the Tupi field in Brazil’s presalt region, the largest oil discovery in the Americas since Mexico’s Cantarell in 1976. Tupi may hold as many as 8 billion barrels of oil.

BP could potentially raise production by between 1 percent and 2 percent a year from 2013 to 2020, according to Andy Inglis, BP’s CEO for exploration and production.

“Tiber represents BP’s second material discovery in the emerging Lower Tertiary play in the Gulf of Mexico, following our earlier Kaskida discovery,” Mr. Inglis said in a statement Wednesday.

The discovery “will be bigger” than Kaskida, which is estimated to hold 3 billion barrels, BP spokesman Robert Wine said. “This is a whole new geological play we’ve got here.”

The British producer last month bought additional acreage in the Lower Tertiary, or so-called Paleogene, region of the Gulf of Mexico. The 24 million- to 65 million-year-old formation, where Exxon Mobil Corp. and Chevron Corp. are drilling wells, was previously thought to be unreachable. Tiber is the deepest exploration well ever drilled by the oil and gas industry, BP said.

BP said it’s the largest net leaseholder in the Lower Tertiary area.

“I believe there are other structures to investigate,” Mr. Wine said. The company plans to drill a second well at Tiber next year, he added.

BP is operator of the Tiber project with a stake of 62 percent, while Petroleo Brasileiro SA, Brazil’s state-controlled oil company, holds 20 percent and ConocoPhillips 18 percent.

“The announcement of Tiber confirms the very positive prospectivity of the Lower Tertiary geological play in the locale,” said Jason Kenney, an analyst at ING Wholesale Banking in Edinburgh, Scotland. The news is “positive, and potential for more upside still” possible.

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