This paper examines British Petroleum's September 2009 announcement of a major oil discovery at the Tiber Prospect in the Gulf of Mexico, located approximately 250 miles from Houston, Texas, at a record-breaking depth of 35,055 feet. The paper reviews estimates that the reservoir may hold up to three billion barrels of oil, discusses the geological significance of the Lower Tertiary/Paleogene formation, and considers the economic implications for U.S. energy imports and consumer fuel costs. It also addresses the high drilling costs involved, the discovery's competitive advantages over foreign oil production, and a related Lower Tertiary site known as the Chinook and Cascade Prospects.
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According to a press release issued on September 2, 2009, British Petroleum (BP) announced the discovery of a massive oil deposit at its Tiber Prospect in the Gulf of Mexico. This well, located in the Keathley Canyon block 102 approximately 250 miles from Houston, Texas, sits some 4,132 feet below the surface, with the well itself reaching a depth of 35,055 feet — "making it one of the deepest wells ever drilled by the oil and gas industry" ("BP Announces," 2009). Exactly how much oil is held in this reservoir is not currently known, but BP officials estimate it contains approximately three billion barrels.
If this estimate proves accurate, it could make a substantial difference in the volume of oil imported by the United States, thereby lowering not only the cost of oil domestically but also the fuel costs borne by the average American consumer.
Edward Gismatullin, a reporter for Bloomberg News, writes that the discovery has boosted oil output in the Gulf of Mexico region "by 50% to 600,000 barrels . . . equivalent a day after 2020," and is roughly equal to a year's output from Saudi Arabia, the largest member of OPEC, and "close to matching the UK's entire proven reserves" (2009). Regarding the nature of the oil deposit itself, BP spokesman Robert Wine described the discovery as "a whole new geological play" — a reference to the oil being held in what the industry calls the Lower Tertiary, or Paleogene, a 65-million-year-old geological formation.
This formation lies almost as deep beneath the Gulf of Mexico as Mount Everest is high and was previously considered unreachable by petroleum geologists (Gismatullin, 2009). The discovery therefore represents not only a quantitative milestone but a qualitative breakthrough in deep-water drilling capability.
For some specialists in the oil industry, BP's discovery came as a major surprise. The Gulf of Mexico had long been considered a "dead sea" — a reference to the prior belief that the gulf "had already offered up all of its big discoveries." Yet it is "now again front and center for petroleum explorers" such as BP and several other major U.S. oil companies (Gold, 2009). Currently, the costs associated with drilling in the Gulf of Mexico are considerable, reaching approximately $200 million per well. This figure does not include expenses for exploratory wells, pipelines, or the floating facilities and oil platforms from which most drilling operations are conducted.
Nevertheless, several important economic advantages are tied to this discovery and to similar endeavors in the region. Oil companies operating in the Gulf of Mexico "will have to pay the U.S. less taxes, royalties, oil payments, and other levies" compared to drilling within the national waters of other oil-producing nations (Gold, 2009), many of which are OPEC members. This competitive advantage strengthens the business case for continued deep-water exploration in U.S. territory.
In addition to the Tiber Prospect, there are plans for exploring a second Lower Tertiary site in the Gulf of Mexico known as the Chinook and Cascade Prospects, discovered by a Brazil-based oil exploration company earlier in 2009. However, unlike the BP discovery, this site will require a highly expensive floating production, storage, and off-loading facility (FPSO) — a significantly greater logistical and financial undertaking.
"Cost advantages over foreign oil drilling"
"Drilling risks and additional exploration sites"
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