CORRECT: BP Makes "Giant" Oil Find In Deep U.S. Gulf Well

U.K. energy giant BP PLC's (BP) shares rose more than 3% Wednesday after it announced a "giant" oil discovery very deep beneath the Gulf of Mexico, its latest find in an area that is proving to hold considerable resources, but stretches the limit of its technical capabilities.

Wednesday's announcement comes as Western oil companies find themselves under pressure to push technological limits to make new discoveries, having largely been denied access to the biggest oil resources in the Middle East.

BP's discovery, on a field called Tiber, is one of the deepest oil fields ever drilled. Lying more than 10 kilometers underground, it probably holds more than the 3.0 billion barrels of oil equivalent, or boe, that BP found at the nearby Kaskida field in 2006, said spokesman Robert Wine. At a 20%-30% recovery rate, which would be typical for this kind of field, Tiber could contain recoverable reserves of 600 million to 900 million boe, said NCB Stockbrokers analyst Peter Hutton.

The find is confirmation of BP's strong focus on the Gulf of Mexico, although it only represents around 7%-10% of its existing reserves, Hutton added.

If both Tiber and the nearby Kaskida discovery are developed, they could boost BP's output in the Gulf of Mexico by more than 60% to around 650,000 boe per day within the next 15 years, said Wine.

"These material discoveries, together with our industry-leading acreage position, support the continuing growth of our deep water Gulf of Mexico business into the second half of the next decade," said Andy Inglis, chief executive of exploration and production at BP.

The discovery marks the latest in a string of successes by Western companies using new technology and techniques to make big oil finds in previously untapped areas.

Tiber is almost on a par with billion-barrel discoveries in Ghana and Uganda made by consortia led by U.K. oil explorer Tullow Oil PLC (TLW.LN). Tullow has enjoyed considerable success by focussing on geological formations called stratigraphic traps, which have received significantly less attention than easier-to-find structural traps that hold the bulk of conventional oil resources.

The discoveries in the Gulf of Mexico and Africa pale in comparison with the huge oil finds offshore Brazil of between 8 billion and 12 billion boe. Those discoveries, led by Petroleo Brasileiro SA (PBR), lie under more than 2,000 meters of water and a further 5,000 meters under sand, rock and a shifting layer of salt. They could transform Brazil into a new oil power, but will be tough and expensive to develop for large scale production.

BP is also likely to find Tiber and Kaskida technically challenging and costly to develop, but the rewards are potentially huge, said ING analyst Jason Kenney.

"Having had the experience of Thunder Horse means our capabilities have been extended," and BP believes both Kaskida and Tiber are within the bounds of what it can achieve, Wine added.

Thunder Horse, BP's cutting-edge deep water Gulf of Mexico project which started last year is now producing 300,000 boe per day, suffered a long delay due to technical problems, but is now the most valuable asset in the company's portfolio, he said. "Repeating that kind of find is the holy grail" for BP, Kenney added.

BP is quite excited about the potential of the geological zone containing Tiber and Kaskida, the company's spokesman said. "We are looking at various other structures in the area that we hope would have similar promise," he said.

BP's partners in Tiber are Petrobras and ConocoPhillips (COP).

 
   -By James Herron, Dow Jones Newswires; [phone]; [e-mail]