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The Jack 2 Discovery & impact on US oil reserves


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NEW YORK (Reuters) -- Chevron Corp. said Tuesday it had successfully drilled for oil in the Gulf of Mexico's deep waters, and one published report suggested the breakthrough could increase U.S. oil reserves by as much as 50 percent.


The successful well, known as Jack 2, reached a record total depth of 28,175 feet, coming in 7,000 feet of water, and more than 20,000 feet under the sea floor Analysts said the find suggested the success of that drilling may mean more oil than previously believed is available under the Gulf of Mexico, a region that already provides a quarter of U.S. output.


During the test at record depths and pressure, the Jack No. 2 well flowed at more than 6,000 barrels of crude per day, Chevron said. That puts it on a par with discoveries in exploration hotspots such as the waters off Angola.


With U.S. oil output in decline, big new fields are increasingly rare and oil companies are widening their search to more difficult places


Chevron, the No. 2 U.S. oil company after Exxon Mobil , did not give an estimate of the field's reserves.


The Wall Street Journal cited Chevron officials as estimating recent discoveries in the Gulf of Mexico could hold as much as 15 billion barrels of oil and gas reserves. That would boost U.S. current reserves by 50 percent.


The region could become the nation's biggest new domestic source of oil since the discovery of Alaska's North Slope more than a generation ago, the Journal said.


"This region is proving quite prospective. Certainly the test well results are on the top end of most analysts' ranges," said Jason Kenney, an analyst at ING in London.


Mike Wittner of investment bank Calyon cautioned that until the size of the field was known it was difficult to draw conclusions.


"It seems to be a significant find and there is still life left in the deepwater Gulf of Mexico, particularly as you move into ultra-deep water," he added.


Chevron is the operator of the Jack prospect with a 50 percent working interest. Devon Energy (Charts) and Statoil (Charts) each own a 25 percent working interest.


"The results of the Jack test allow Chevron and its co-owners to better understand the deliverability of the emerging lower tertiary trend, a trend where Chevron is the largest leaseholder," said Gary Luquette, Chevron's president, North America Exploration and Production.


Chevron was not immediately available for further comment.




Chevron first announced the discovery of the Jack prospect in September 2004. It is 270 miles southwest of New Orleans and 175 miles offshore. The test on Jack 2 broke Chevron's 2004 Tahiti well test record as the deepest successful well test in the Gulf of Mexico.


More than half a dozen world records for test equipment pressure, depth, and duration in deepwater were set during the Jack well test, Chevron said.


Chevron and its co-owners plan to drill an additional appraisal well in 2007.


Chevron said it is the largest lease holder in the deepwater Gulf of Mexico, and is currently developing the $3.5 billion Tahiti project, scheduled to commence production in 2008.

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The general consensus is that oil forms 7,500-15,000 feet beneath the surface of the Earth.

Once the oil is formed, it has been known to migrate to deeper depths and maintain its chemical nature, but with some allowance for alteration. (It tends to become "heavier" as the lighter-chain hydrocarbons are heated and volatilized.) Temperature plays a key role in all of this. At modest temperatures, and even if buried below the accepted depth for the oil window, the oil will retain its essential properties. But temperatures above about 180-200 degrees Fahrenheit will start to break down the oil into shorter-chain hydrocarbons such as natural gas (methane, ethane, propane, etc.). The warmer the rock, the greater the likelihood that the organic matter will essentially become "overcooked" and the hydrocarbon molecules will volatilize and break down into carbonized material that is not oil, and eventually not even natural gas. When this occurs, you have passed "outside the oil window," either in terms of depth or temperature.


Chevron's Jack #2 well was drilled to a depth of about 20,000 feet beneath the seabed. While finding oil at such a depth is not unheard of, it is somewhat unusual, as 20,000 feet is usually considered to be too deep for oil to maintain its properties. Many 20,000-foot wells that are drilled into rock formations that might hold oil yield mere "oil shows," meaning hydrocarbon in insufficient amounts or quality to "make a well." To the extent that deep wells produce anything, they commonly produce dry gas, with no or almost no associated oil. But still, oil window or no, oil is where you find it.


According to the Oil & Gas Journal, more than 99% of oil production in the Gulf of Mexico has come from upper Tertiary formations, namely from rocks of Pleistocene, Pliocene, and Miocene age. As recently as the early 2000s, few observers believed that the lower Tertiary sands would, if they could be reached, yield oil or gas from great depths.


But apparently, there is oil down there. Why? Temperatures down the hole in Jack #2 must be relatively "cool," compared with the temperatures at 20,000 feet in wells located elsewhere. So perhaps the lower Tertiary and Jack #2 well is an example of geological processes, particularly subsidence, defenestrating oil outside of the oil window. How does that work?


It may be that the Gulf of Mexico basin subsided rapidly enough that the sediments went deep faster than heat flow came up to cook them. That is, sediments went down faster than heat could come up. Is this what happened? Good question, but why would that happen? Did something slow the process of heat flow, or otherwise act as a barrier? Could something have served to, in essence, "insulate" the organic matter buried so deeply?


...MORE: http://www.energybulletin.net/20455.html


= = = = =


### CONSPIRICY TO DEPRESS OIL - in time for the Election ? ###


Read This : The Timing is suspicious...


"the Chevron announcement is not exactly "new" news. The Jack #2 well was drilled in 2004, and Chevron and its partners spent much of the past two years evaluating and testing the prospect. According to public accounts, the Jack well penetrated more than 350 feet of "oil pay," which is a very respectable and auspicious encounter with the relatively unfamiliar rocks of the geological target formations. But Chevron's technical teams apparently required a large amount of additional testing, data gathering, and analysis in order to determine future development plans. Thus, Chevron kept its information "tight" until last week"


...MORE: http://www.whiskeyandgunpowder.com/Archive...6/20060912.html

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Clarification of the Huge Chevron Gulf Oil Discovery

by Randy Kirk

September 8th, 2006


The September 5th announcement by Chevron and Devon and Statoil of the huge Gulf of Mexico discovery should be clarified. The announcement claims that the discovery could increase US proven reserves of oil by as much as 50%. However, the total amounts are highly speculative. Additionally, the discovery likely won't impact oil markets but could potentially impact natural gas markets since the discovery is probably mainly natural gas. The area will not come online for at least 4 years and, at a full rate, for at least 7 years. Further, it is likely that there are political motivations behind the announcement, as the vote to open offshore drilling in the United States is upcoming in the US Senate.


1. The range of amount -- from 3 billion to 15 billion (in itself a huge range -- reserves of Exxon Mobile are around 14 billion barrels total) is comprised of no single field of more than 300 million barrels. An entire area of as much as 15 billion barrels with no "giant" over 1 Bn bar oil field is unusual. Oil discoveries tend to cluster with a giant (King) and several queens and even more jacks.


2. The area is very deep: 7000 feet of seawater and a further 20,000 feet below the ground. That is about 3 miles below the surface, in 1+ miles of deep water. The normal time to accurately estimate oil and gas field size is months. These fields are more challenging because of the extreme depths. It is therefore likely that very little is known with certainty about the potential reserves from a geological standpoint.


3. Production will not start, at the very earliest, at 2010. Full production, will not start at the very earliest 2013. Many projects are being delayed so these dates are most likely the best possible scenario.


4. The wells are located in deep water and will not be served by underground GOM pipelines. The oil will be pumped directly to tankers. Pipelines are faster and more efficient, and tankers will put a higher price and limited the amount of oil pumped out.


5. The wells are most likely mainly natural gas, as they are very deep. All estimates are in barrels of oil equivalent. Oil tends to form closer to the surface, gas deeper. Therefore the discovery is likely to impact natural gas markets, not oil, if the gas exists in meaningful quantities.


6. The US Senate is weeks away from voting on the lifting of the 25-year ban on offshore drilling off the majority of the coasts in the US. This offshore drilling bill was approved in the Congress but political analysts believe the bill will face more opposition in the Senate. The oil industry stands to make high profits if Congress will open up Florida and the Offshore East coast to drilling. To date the offshore drilling bill has not been approved by both houses because of environmental interests. A large potential oil "discovery" in the Gulf would provide evidence that the passing of the offshore oil bill would be beneficial.


7. Related to point #6, the announcement is reminiscent of the Mexican "huge oil discovery" announced last year, of a possible 10 billion barrels, which was quietly revised this year to around 43 million barrels, a downward revision of 99.57%. This similar "discovery" was made in Mexico last year a few months before the Mexican parliament was to vote on Pemex (state oil co)'s budget and rights to expand drilling. This illustrates the potential political pressure to announce oil and gas discoveries.


8. The wells are estimated to cost between $80M to $120M each, starting in 2010, and a completion time of 60 days. Payback period with gas at $7 is about 3 to 5 years (by my rough calculations). Although it is likely that some new technical issues will be likely be needed to be resolved as the depth is approaching record levels. Further, insurance rates at these depths in the Gulf will likely be very high - the rough payback period here doesn't include insurance costs.


by Randy Kirk

September 8th, 2006

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  • 1 month later...

I was reading something the other day (it was either The Oil Drum or a piece on Mr Simmons on the WSJ) that gave some technical details of why these deap fields are not all they are cracked up to be. Apparently there are aome very real problems in getting the oil out and even if you do get the oil out it usually peaks within a couple of years.


More smoke and mirrors me thinks.

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the news was part of the concerned strategy to get oil down prior the election


this find may need oil of $150 or $200 before it is economic

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