Promising New Oil Find in Gulf of Mexico

Tuesday, September 5th 2006, 9:42 am

By: News On 6

WASHINGTON (AP) _ Tests of a deep-water well in the Gulf of Mexico could indicate a significant oil discovery, three companies announced Tuesday, in the first project to tap into a region that reportedly could boost U.S. oil and gas reserves by as much as 50 percent.

The Jack 2 well was drilled about 5.3 miles deep by U.S. oil company Chevron Corp., with partners Statoil ASA of Norway and Devon Energy Corp. of Oklahoma City. During the test, the Jack 2 well sustained a flow rate of more than 6,000 barrels of oil per day, Statoil said.

``Test results are very encouraging and may indicate a significant discovery. The full magnitude of the field's potential is still being defined,'' Statoil said in a statement.

The discovery has industrywide implications, analysts said.

``They may be the first ones to hit the jackpot, but if the current thinking is correct, this is only a beginning. Other companies will emerge as good, or better,'' said Oppenheimer & Co.'s Fadel Gheit.

The successful test wells do not mean a huge supply of oil will hit the market anytime soon. Gheit estimated that the first production might not come on line until after 2010, depending on how many more test wells the companies drill.

The Wall Street Journal reported in Tuesday's editions that the region where the well is located could become the nation's biggest new domestic source of oil since the discovery of Alaska's North Slope more than a generation ago.

The Journal said Chevron and Devon officials estimate that recent discoveries in the Gulf of Mexico's lower-tertiary formations hold up to 15 billion barrels of oil and gas reserves, a total that would boost the nation's current reserves by 50 percent.

The well was drilled in the Walker Ridge area of the Gulf, about 270 miles southwest of New Orleans and 175 miles off the coast. It followed up a discovery made by Chevron in 2004.

``This area is one of the new and promising deep-water areas in the Gulf of Mexico,'' said Oivind Reinertsen, senior vice president of Statoil's Gulf of Mexico assets in Houston.

``The Jack 2 well test data are encouraging and may form the basis of future development projects in Walker Ridge,'' he said.

In a separate statement, San Ramon, Calif.-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 20,000 feet under the sea floor below 7,000 feet of water for a total depth of 28,175 feet.

Chevron has a 50 percent stake in the field, while Statoil and Devon own 25 percent each.