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

U.K. energy giant BP PLC's (BP) shares rose 3% Wednesday after it said it has made a "giant" oil discovery in a very deep well drilled in U.S. waters in the Gulf of Mexico, an area where it is already the largest individual producer following a string of large finds.

The discovery could add 7%-10% to BP's existing reserves, said NCB Stockbrokers analyst Peter Hutton. 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 barrels of oil equivalent per day within the next 15 years, said a BP spokesman.

"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.

Tiber is larger than BP's 2006 Kaskida discovery, which is in the same geological region and contains around 3 billion barrels of oil equivalent in place. BP said it was too early to estimate the resources in place in Tiber.

Not all of this oil will be recoverable, and the company needs to do more work to figure out how much it will be able to extract, said a BP spokesman. The oil discovered in Tiber is light, which gives it a good potential for a higher recovery rate, he said.

A 20%-30% recovery rate, which would be typical for this kind of field, would imply recoverable reserves of 600 million to 900 million barrels of oil equivalent, said Hutton.

ING analyst Jason Kenney said developing Tiber and Kaskida is likely to prove technically challenging and costly, but the rewards are potentially great. Thunder Horse, BP's long-delayed deep water Gulf of Mexico project, is now producing 300,000 barrels of oil equivalent per day and is the most valuable asset in the company's portfolio, he said.

"Repeating that kind of find is the holy grail" for BP, which places great emphasis on the potential of the region, Kenney said.

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.

The Tiber well, 250 miles southeast of Houston, Texas, is in 1,259 meters of water and was drilled to a total depth of 10,685 meters, "making it one of the deepest wells ever drilled by the oil and gas industry," the company said.

BP operates Tiber and has a 62% stake in the field. Its partners are Petroleo Brasileiro SA (PBR) and ConocoPhillips (COP).

At 1022 GMT, BP shares were up 3.4%, or 17 pence, at 537 pence.

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