The People of America's Oil and Natural Gas Indusry

Shell's 'Significant' Oil Discovery in the Gulf

Jane Van Ryan

Jane Van Ryan
Posted March 23, 2010

Shell has announced a "significant new oil discovery" in the deepwater Gulf of Mexico.

The find is located in the Appomattox prospect area in the Mississippi Canyon. The well was drilled through more than 7,200 feet of water to a total depth of 25,077 feet where it found a 530'-thick layer containing oil.

A published report indicates the discovery is estimated to hold at least 100 million barrels of oil. Shell's partner, Nexen Inc. which owns rights to 20 percent of the new discovery, says the find has "excellent reservoir quality."

The new well complements two other successful wells that were drilled in the Shiloh prospect in 2003 and at Vicksburg in 2007, about 6 miles east of Appomattox. For each well, Shell partnered with Nexen.

Although drilling in the deepwater of the Gulf is very expensive, with wells costing several million dollars to drill and up to $1 billion or more to bring the energy online, a recent report says the search for giant oilfields beneath thousands of feet of water is continuing despite the recession. Transocean Ltd., which is the world's largest offshore drilling contractor, says all of its rigs capable of drilling at depths greater than 7,500 feet are booked for this year.

Advanced technologies are improving the odds of finding offshore oil and developing it without harming the environment. Last year, BP announced a "giant" discovery at its Tiber prospect, which is believed to contain about three billion barrels of oil. In 2008, 15 discoveries were made in water at least 1,000 feet deep.

Last week, the Minerals Management Service (MMS) offered leases on several tracts in the central Gulf of Mexico, generating $949 million in high bids. Seventy-seven companies participated in the auction for 468 tracts covering more than 2.4 million acres off Louisiana, Mississippi and Alabama.

Gulf energy investments are paying dividends to American consumers. The oil and natural gas help to create jobs, reduce the need for imported oil, and generate government revenues in the form of "bonus bids" for leases, taxes, and royalties to pay for services.

Read more information about how companies lease offshore lands for energy development and the resulting benefits to all Americans.