New oil supply could add to national reserves

WASHINGTON -- A trio of oil companies led by Chevron Corp. has tapped a petroleum pool deep beneath the Gulf of Mexico that could boost the nation's reserves by more than 50 percent.\nA test well indicates it could be the biggest new domestic oil discovery since Alaska's Prudhoe Bay a generation ago. But the vast oil deposit roughly four miles beneath the ocean floor won't significantly reduce the country's dependence on foreign oil, and it won't help lower prices at the pump anytime soon, analysts said.\n"It's a nice positive, but the U.S. still has a big difference between its consumption and indigenous production," said Art Smith, chief executive of energy consultant John S. Herold Inc. "We'll still be importing more than 50 percent of our oil needs."\nChevron on Tuesday estimated the 300-square-mile region where its test well sits could hold between 3 billion and 15 billion barrels of oil and natural gas liquids. The U.S. consumes roughly 5.7 billion barrels of crude oil in a year.\nIt will take many years and tens of billions of dollars to bring the newly tapped oil to market, but the discovery carries particular importance for the industry at a time when Western oil and gas companies are finding fewer opportunities in politically unstable parts of the world, including the Middle East, Africa and Russia.\nThe proximity of the Gulf of Mexico to the world's largest oil-consuming nation makes it especially attractive. And it could bring pressure on Florida and other states to relax limits they have placed on drilling in their offshore waters for environmental and tourism reasons.\nThe country's reserves currently are more than 29 billion barrels of oil equivalent, according to the U.S. Energy Department. But the U.S. imports most of its oil from abroad, and its overall supply is tiny when compared with a country like Saudi Arabia, whose reserves exceed 250 billion barrels.\nChevron's well, called "Jack 2," was drilled about 5.3 miles below sea level. Chevron has a 50 percent stake in the field, while partners Statoil ASA of Norway and Devon Energy Corp. of Oklahoma City own 25 percent each.\nDuring the test, Jack 2 sustained a flow rate of more than 6,000 barrels of oil per day, but analysts and executives believe the payoff could be much larger.\nThe financial implications of the prospect are most significant for independent oil and gas producer Devon, which is the smallest of the three partners. Devon's shares soared 12 percent on the New York Stock Exchange.\n"This could not have happened in a better place," Devon CEO Larry Nichols said in a conference call with analysts.\nThe successful test well does not mean a huge supply of cheap oil will hit the market anytime soon.\nOppenheimer & Co. analyst Fadel Gheit estimated that the first production for the Chevron-led partnership might not come on line until after 2010, depending on how many more test wells the companies drill. That said, many companies, including BP Amoco PLC, Exxon Mobil Corp. and Anadarko Petroleum Corp., stand to benefit from their own projects in the so-called lower tertiary, a rock formation that is 24 million to 65 million years old.