Tuesday, September 05, 2006

New oil find in Gulf of Mexico

A group of oil & gas companies, led by Chevron Corporation, has announced a significant oil discovery in the Gulf of Mexico. From the New York Times:

The prospective yield of the area, called the lower Tertiary, could approach six billion barrels of oil, Devon said. The other owner, with a 25 percent interest, is Statoil of Norway. Chevron owns 50 percent.

Statoil said the test results were “very encouraging and may indicate a significant discovery.” It said the company and its partners plan to drill another well in the area next year to try to determine the extent of the field.

The deepwater find has the potential to become one of the largest domestic oil supplies, although people familiar with the industry point out that it will take years for this oil to come to market. From CNN Money:

Neither Chevron nor Devon would say how long it would take for oil from the well to reach market. Experts say it will take billions of dollars to build the deepwater oil platforms and pipelines needed to extract the oil and get it into world markets.

"At best we're not going to see a drop of oil for five years, maybe seven years," said Fadel Gheit, oil analyst for Oppenheimer. "It's great news for Chevron and even more so for Devon. But you can't hold your breath waiting for it."

Shares of the three partner companies are higher today, with Devon leading the pack, up 16% as of 2:06 ET.