Back to the Gulf: Chevron Greenlights Ultra Deepwater Drilling Project
Remember the promised fallout from the BP Gulf of Mexico oil spill? It ain't happenin'. Which is good news for the oil and gas industry, and most likely disappointing to environmentalists. Two major oil companies, Shell (RDS) and Chevron (CVX), have announced plans to move forward with deepwater projects in the past several weeks, proving that where there's oil there will be considerable investment even when tighter regulations and higher costs are part of the deal.
Chevron announced Thursday it has sanctioned development of its Jack and St. Malo fields, 25 miles from each other on the outer edge of the Gulf of Mexico, place called the Lower Tertiary trend after its ancient rock layers. The ambitious project involves tapping fields it discovered seven years ago in water 7,000 feet deep and several miles below the sea floor. The project will include three subsea centers tied back to a massive hub production facility that will have a capacity of 170,000 barrels of oil and 42.5 million cubic feet of natural gas per day. Chevron's investment for just the initial development of the project will hit $7.5 billion.
That's not to say the recently ended moratorium on deepwater exploration drilling didn't have an impact. The moratorium directly affected some 33 deepwater drilling rigs. Shallow-water permit approvals, which weren't supposed to fall under moratorium, also slowed down. Even though it's now over, the moratorium may affect Chevron's Jack-St. Malo project. Gary Luquette, the company's chief of North American exploration and production, told the Houston Chronicle, the moratorium delyaed some drilling at the site and that could mean fewer wells will be available for production at the start-up then initially planned.
But Chevron isn't going to proceed with a project that includes an initial outlay of $7.5 billion unless it's confident offshore drilling regulations will stabilize and that the fields are commercially viable. Meaning this is a validation on both fronts.
Photo from Flickr user Ted Percival, CC 2.0
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