Promising prospect could put Gulf of Mexico back on map

BP's discovery of the biggest US oil find in three years may spur an exploration revival in the Gulf of Mexico.

London-based BP said yesterday it identified a "giant" prospect called Tiber more than 9.7km beneath the surface of the Gulf.

The find confirms there are more large reservoirs of crude off the coasts of Louisiana and Texas, said Gulf research analyst Matt Snyder.

"This is definitely good news for the Gulf," he said. "When a supermajor like BP uses a term like 'giant' to describe a discovery, people sit up and take notice."

The announcement brings new attention to a region where offshore oil exploration was pioneered more than six decades ago when the former Kerr-McGee Corporation drilled the world's first commercial oil well in the Gulf.

It struck crude in October 1947, Daniel Yergin, chairman of IHS Cambridge Energy Research Associates, wrote in The Prize, his book on the industry's history.

The region has lost favour among some producers.

Exxon Mobil, the biggest US oil company, hasn't emphasised Gulf of Mexico exploration because most discoveries haven't been large enough to justify the expense, chief executive officer Rex Tillerson said last year.

Texas-based Enron paid US$8.6 million ($12.7 million) for rights to explore 17 blocks in last month's federal auction of Gulf leases. Tillerson is focusing his US$20 billion drilling budget on places such as Brazil and Qatar that he believes will yield bigger returns.

BP, whose partners at Tiber are Petroleo Brasileiro and ConocoPhillips, said its discovery may hold 3 billion barrels of crude and natural gas. Of that total, the companies may be able to extract the equivalent of 450 million barrels of oil, worth more than US$30 billion.

Tiber is BP's second discovery in three years in a geological formation in the Gulf known as the lower Tertiary, which consists of a layer of rocks created 24 million to 65 million years ago.

It's the 18th discovery to date in the lower Tertiary, which is deeper than any existing producing fields.

BP chief executive officer Tony Hayward is spending US$115 million a week in the US to find new prospects and boost output. Before Tiber begins pumping oil, Hayward's scientists must figure out how to coax crude from delicate seams of stone where temperatures can exceed 121C, said Smith, a former Amoco geologist.

Tiber was drilled 400km southeast of Houston in 1259m of water, reaching almost 9448m beneath the seafloor. The total length of the drill stem from the floor of the rig to the terminus of the well was more than 1.6km longer than Mt Everest is high.

BP, which operates Tiber and owns a 62 per cent stake, plans more wells to assess the expanse and characteristics of the field, according to a company statement. BP said it doesn't yet know if Tiber will prove commercially viable.

If future tests confirm the field holds the equivalent of 450 million barrels of recoverable oil and gas, Tiber will be the largest US find since at least August 2006, when BP discovered Kaskida, another lower Tertiary prospect.

"This proves it's a very prolific trend," said Chris Ross, a Houston oil consultant. "That's good news for people with leases and good news for the US."

- BLOOMBERG