BP Says It's Made 'Giant' Oil Find in Gulf of Mexico

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BP Says It's Made 'Giant' Oil Find in Gulf of Mexico
Published: Wednesday, 2 Sep 2009 | 1:16 PM ET

By: Reuters

Oil major BP said it has made an oil discovery in the Gulf of Mexico, which analysts believe could contain over 1 billion barrels of recoverable reserves, reaffirming the Gulf's strategic importance to the industry.

BP [BP  52.53    2.06  (+4.08%)] said in a statement on Wednesday that it had made the "giant" find at its Tiber Prospect in the Keathley Canyon block 102, by drilling one of the deepest wells ever sunk by the industry.

Further appraisal will be required to ascertain the size of volumes of oil present, but a spokesman said the find should be bigger than its Kaskida discovery which has over 3 billion barrels of oil in place.

Estimates of recoverable reserves range from around 20 percent of oil in place.

"Assuming reserves in place of 4 billion barrels and a 35 percent recovery rate, BP's proven reserves .. would rise by 868 million barrels -- equivalent to 4.8 percent of the group's 18.14 billion barrels of proven reserves," Aymeric De-Villaret, oil analyst at Societe Generale said in a research note.

BP, the biggest oil producer in the U.S. and biggest leaseholder in the Gulf of Mexico, has a 62 percent working interest in the block, while Brazilian state-controlled Petrobras owns 20 percent and U.S. oil major ConocoPhillips [COP  44.34    0.19  (+0.43%)   ] owns 18 percent.

Iain Armstrong, analyst at Brewin Dolphin, said the discovery may have implications for long-term oil prices. "It will ease concerns about peak oil because it shows there is life left in these mature areas," he said, adding that it could be the second half of the next decade before the find is producing.

The discovery also bodes well for other exploration in that part of the Gulf of Mexico, including at Royal Dutch Shell's nearby Great White field, Jason Kenny, oil analyst at ING in Edinburgh, said.

BP shares, which had been trading slightly down ahead of the statement, closed up 4.3 percent at 541 pence, outperforming a 1.75 percent rise in the DJ Stoxx European oil and gas sector index.

http://www.cnbc.com/id/32653850