Chevron, Partners, Hail Oil Find in Gulf

Chevron and its partners say an oil well five miles beneath the surface of the Gulf of Mexico is doing well in initial production tests. Over time, the oil from one of the deepest wells on Earth could boost U.S. reserves.

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From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.

Today, Chevron and two other oil companies announced that they have successfully completed a production test at one of their oil wells deep in the Gulf of Mexico. The announcement appears to open up a huge new oil field just a few hundred miles from the U.S. coastline, and oil-industry officials say it could greatly increase U.S. petroleum reserves. But it will be several years before the oil will be brought to market.

NPR's Jim Zarroli reports.

JIM ZARROLI: The three companies said that for the first time, they've been able to extract oil from one of their wells in the deep waters of the Gulf of Mexico. The well is located 175 miles offshore and is among the deepest in the world. Companies have been drilling in the area for several years, but analyst David Heikkinen of Pickering Energy Partners says this is the first time one of them has succeeded in producing oil there.

Mr. DAVID HEIKKINEN (Pickering Energy Partners): Now you have a proof that not only is there oil in the ground, but it's going to be productive, and with that production test, the confidence level for companies to move forward with additional exploration to try to replace the declining production in the Gulf of Mexico increases significantly.

ZARROLI: The announcement by the oil companies today heralds what could be one of the most important American oil finds in years. Chevron said that the oil is flowing from the well at a rate of about 6,000 barrels of oil a day, and industry officials believe the region actually holds much more than that. John Kilduff is an energy analyst at Fimat USA.

Mr. JOHN KILDUFF (Fimat USA): The estimates put its field range from 3 billion barrels to 15 billion barrels of oil. If it's even just the three, that would allow us to get 400,000 barrels a day for the next 20 years, which is what we're getting out of Prudhoe Bay right now. Also, it's a light, sweet crude oil - gasoline ready crude oil as I like to describe it - which is also in short supply.

ZARROLI: And with oil hovering near $70 a barrel, big oil companies, as well as independents, will have plenty of incentive to drill. Moreover, at a time when the world's oil producing regions are often fraught with conflict, the oil is right in the United States' backyard in an area where the biggest risk is hurricanes. Larry Nichols is chairman and CEO of Devon Energy Corporation, one of Chevron's two partners in the venture.

Mr. LARRY NICHOLS (Devon Energy Corporation): This could not have happened in a better place. The Gulf of Mexico is close to major oil and gas markets, has a favorable physical regime and has relatively less political risk than almost anyplace else in the world.

ZARROLI: To be sure, 3 to 15 billion barrels is still a small part of the world's total oil supply. It's just a fraction of what can be found in the vast fields of the Middle East. And no one is promising that the new fields will mean long term energy independence for the United States, which consumes nearly 6 billion barrels of oil every year.

The challenge of removing the oil from the region is still huge. The companies had to drill through 20,000 feet of the earth's core to reach the oil. David Heikkinen of Pickering Energy Partners says it will take years to build the pipelines that will bring the oil to shore.

Mr. HEIKKINEN: The production doesn't come online for three to four years, and at that point in time, probably the shallower waters and the rest of the American production volumes will have declined, that this is just going to replace the natural declines of the existing production.

ZARROLI: Heikkinen says that's probably why the oil markets had only a small reaction to today's announcement. October oil futures were down just slightly.

Jim Zarroli, NPR News, New York.

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