Summary
A vast discovery in the Gulf of Mexico is the latest sign of success in a high-risk, high-reward strategy.
Tiber was drilled 250 miles (400 kilometers) southeast of Houston in 4,132 feet (1,259 meters) of water, reaching almost 31,000 feet beneath the seafloor. Transocean Ltd., the world’s largest offshore driller, used the Deepwater Horizon semi- submersible rig for the discovery. BP, which hasn’t disclosed the project’s costs, plans more wells to assess the find.
Analysis
- BP is the largest producer of oil and gas in the US Gulf of Mexico with net production of over 400,000 barrels of oil equivalent per day. BP is progressing nine US Gulf of Mexico projects: Atlantis Phase 2, Tubular Bells, Kodiak, Freedom, Kaskida, Isabela, Santa Cruz, Mad Dog tiebacks and Great White.
- Major BP developments in the deepwater Gulf of Mexico include: Pompano, 1994; Marlin, 2000; Horn Mountain, 2002; Na Kika, 2003; Holstein, 2004; Mad Dog, 2005, Atlantis, 2007, Thunder Horse 2008.
- BP has a leading acreage position in the emerging Lower Tertiary area of the Gulf of Mexico. BP's first major discovery in the Lower Tertiary was Kaskida in 2006 which is currently under appraisal.
The well, located in Keathley Canyon block 102, approximately 250 miles (400 kilometres) south east of Houston, is in 4,132 feet (1,259 metres) of water. The Tiber well was drilled to a total depth of approximately 35,055 feet (10,685 metres) making it one of the deepest wells ever drilled by the oil and gas industry.Tiber is operated by BP (NYSE: BP), with a 62 per cent working interest with co-owners Petrobras (NYSE: PBR/PBRA, 20 per cent) and ConocoPhillips (NYSE: COP, 18 per cent).
However with cautious optimism we do see such exploration in unreachable sites, by all oil companies going beyond the risk frontiers with the anticipation that oil futures are bound to rise beyond the 142 $ peak of 2008. Besides more such finds would have a quelling influence on price volatility, though going by global oil demand which is close to 100 million barrels PER DAY. (U.S. demand alone is nearly 10 million barrels per day.) BP's extraction of even the maximum estimated recoverable reserves of 900 million barrels from these new finds, will add only nine days to global supply---and that only fifteen years hence.
However as far as BP shareholders are concerned, it is reported that once production finally starts, it will permit sustainability of the daily rate of production way beyond 2015. BP had said in March that it plans to raise average output by about 1.5 percent a year to 4.1 million barrels of oil equivalent a day in 2012. The company could potentially raise production by between 1 and 2 percent a year from 2013 to 2020,
However as far as BP shareholders are concerned, it is reported that once production finally starts, it will permit sustainability of the daily rate of production way beyond 2015. BP had said in March that it plans to raise average output by about 1.5 percent a year to 4.1 million barrels of oil equivalent a day in 2012. The company could potentially raise production by between 1 and 2 percent a year from 2013 to 2020,
Himadri Banerji consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
