BP announces a major new discovery in the Gulf of Mexico

on Sep 02 in Oil Exploration tagged by Trevor Hicks

This is excellent news for the industry.  For all the words I’ve expended on the topic of Peak Oil, I’d love to have my concerns blown to smithereens.  BP estimates this find called “Tiber” at about 3 billion barrels, putting it comfortably in the “giant” range.  Bloomberg has a story that mentions:

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.

Which means they expect 300k barrels per day from this field in 10 years.  This is a big deal.

For context, adding 300,000 barrels per day production would get the overall Gulf of Mexico production back up to 2004 levels from today, 5 years worth of decline. Between this and some of the other sizable discoveries in recent years also in the Lower Tertiary area of the Gulf like “Kaskida” and “Jack” , it’s not unreasonable to think that overall GoM production could held steady or even increase somewhat over the next ten years.

Of course, it won’t be easy. This field is in more than 4000 feet of water, which is challenging and expensive, but feasible. The initial well was drilled to more than 35,000 feet, a new world record. There’s nothing routine or proven about producing from such depths. Well, one thing is proven and that’s that it will be expensive. I haven’t seen any reports about the pressures or temperatures they experienced at that depth, but I would assume that they fried some very, very expensive drilling, testing and logging equipment. Producing fluids from such depths is no picnic either. And this field which is roughly due south of Lake Charles and due west of North Padre Island is dozens of miles from the nearest product gathering infrastructure.  You wouldn’t consider a field like this economical without the expectation of triple digit prices in the future.

Also for context, using rough numbers, if the world is producing 85 million barrels per day of crude and equivalents with a global decline rate of 6.7% per the IEA, the break even rate for the world is an annual capacity addition of 5.7 million barrels per day.  Wikipedia tracks the global megaprojects.