BP strikes it big but at what cost?

07 September 2009

It’s getting much harder to tap into new oil resources as BP found last week when it discovered substantial reserves at its Tiber Prospect almost seven miles beneath the deep waters of the US Gulf of Mexico. Located at Keathley Canyon, approximately 400 km south east of Houston, the find is in 1,259 m of water.

The Tiber well was drilled to a total depth of 10,685 m making it one of the deepest wells ever drilled by the oil and gas industry and showing just how far oil producers are prepared to go to find new resources.

Oil was found in multiple Lower Tertiary reservoirs. Andy Inglis, chief executive, Exploration and Production explained: "Tiber represents BP's second material discovery in the emerging Lower Tertiary play in the US Gulf of Mexico, following our earlier Kaskida discovery. These material discoveries together with our industry leading acreage position support the continuing growth of our deepwater Gulf of Mexico business into the second half of the next decade."

Inglis estimated that the Tiber deposit holds between 4 billion and 6 billion barrels of oil equivalent, which includes natural gas. An appraisal will be required to determine the size and commerciality of the discovery. BP's first major discovery in the Lower Tertiary was Kaskida in 2006 which is currently under appraisal. The company 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.

Other major 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, and Thunder Horse which produces about 300,000 barrels of oil equivalent per day (boepd).

BP expects Tiber to be among the company's richest finds in the Gulf on par with its crown jewel, the Thunder Horse development. Thunder Horse produces about 300,000 barrels of oil equivalent per day, as much crude as half of Alaska's famous North Slope.

BP will now need to invest millions of dollars over many years before it draws black gold from Tiber. It has been three years since the announcement of the Kaskida discovery and oil has still not been produced there.

When oil fin ally flows from Tiber, it will be especially attractive to refiners in America, where the government wants to cut down on oil imports from the Middle East but it's an expensive business. The production platform will cost in excess of $1 billion and drilling in deep water will add more cost.

The Tiber field is operated by BP, with a 62 per cent working interest with co-owners Petrobras holding 20% and ConocoPhillips has 18%.