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Old 09-05-2006, 02:18 PM   #1
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Major U.S. oil source is tapped

Successful test by Chevron partners in deep Gulf waters could rival Alaska in potential supply; U.S. reserves may swell 50 percent.

By Chris Isidore, CNNMoney.com senior writer
September 5 2006: 1:31 PM EDT


NEW YORK (CNNMoney.com) -- Chevron and its partners have successfully extracted oil from a test well in the deep waters of the Gulf of Mexico, an achievement that could be the biggest breakthrough in domestic oil supplies since the opening of the Alaskan pipeline.

The news sent oil prices lower, with U.S. light crude for October delivery sinking 69 cents to $68.50 on the New York Mercantile Exchange.

The announcement helped dampen fears that oil supplies would be swamped by growing global demand, a concern that helped lift oil to record highs this summer, unadjusted for inflation.

But experts cautioned that relief at the pump from the breakthrough is many years away.

"It sounds terrific, but this means nothing for the near-term period," said Tom Kloza, chief oil analyst for the Oil Price Information Service, which surveys gasoline prices daily for AAA.

"But it should remind everyone that before they buy into the reckoning of $100 a barrel oil that all those estimates don't take into account tremendous amount of money can be spent on exploration when prices are at these levels."

Shares of the three partners in the test well known as "Jack 2" rose sharply in trading Tuesday. Chevron (up $2.10 to $66.93, Charts), which owns a 50 percent stake, jumped 3 percent, while Devon Energy (up $8.21 to $72.36, Charts) soared nearly 12 percent, and Norwegian oil company Statoil (up $0.57 to $28.08, Charts)'s U.S. shares added about 2 percent. Devon and Statoil each own 25 percent stakes.

Shares of other major oil companies with rights to this area of the Gulf, including Exxon Mobil (Charts), BP (Charts) and Royal Dutch Shell (Charts), rose modestly on the news.

Neither Chevron nor Devon would say how long it would take for oil from the well to reach market. Experts say it will take billions of dollars to build the deepwater oil platforms and pipelines needed to extract the oil and get it into world markets.

"At best we're not going to see a drop of oil for five years, maybe seven years," said Fadel Gheit, oil analyst for Oppenheimer. "It's great news for Chevron and even more so for Devon. But you can't hold your breath waiting for it."

A boon for the United States

Almost all the oil platforms in the Gulf are relatively close to the shore, on a shelf that puts them in less than 1,700 feet of water.

In recent years, oil has been found in the deeper waters of the Gulf known as the "lower tertiary" area, where the water is between 5,000 to 10,000 feet deep, but it had yet to be proved that oil could be extracted in enough volume to make such finds practical.

The Jack 2 well, which is 175 miles offshore, is in more than 7,000 feet of water and then drilled through more than 20,000 feet of rock below the sea floor, or about five miles below the surface of the Gulf. Chevron said the test had a flow rate of more than 6,000 barrels of crude oil a day.

Chevron would not estimate how much its reserves would be increased as a result of the test, nor would Devon. But Chevron said that it now believes the lower tertiary region of the Gulf could hold reserves of 3 billion to 15 billion barrels of oil. Total established U.S. reserves are estimated at less than 30 billion barrels.

"Until now no one was sure if the oil in this play would flow," said Zoe Sutherland, North American oil exploration analyst for Wood Mackenzie, a global oil research and consulting firm. "It doesn't matter how many large discoveries you have if you can't produce it. This is very exciting news."

Sutherland said it is fair to compare the breakthrough with the opening up of the North Slope of Alaska in terms of U.S. supply.

Ohio Northern University Professor A. F. Alhajji said the implications of this successful test could also help to open greater offshore supplies at other fields around the globe. He said that could mean even greater addition to worldwide reserves than those that now seem to be within reach in the Gulf.

"Whatever technology they used, I can tell you companies are scrambling right now to try to use it," said Alhajji.

Gheit said that it is only with oil at its current historically high prices that exploration at these depths really became economically practical.

"This is the silver lining of higher oil prices," he said. "If we didn't have higher oil prices, they wouldn't have dared to risk this much capital here."
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Old 09-06-2006, 03:18 PM   #2
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CNN today...oil is a major bargain now! Reporter stated that oil per barrel closed at $1.10 less expensive than yesterday. They said that is a major drop in price due to the deep water drilling and finding of the Gulf oil source. This is excellent news. Let's hope is continues!!!
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Old 09-14-2006, 01:10 PM   #3
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Ok...regular unleaded when I posted this above was $2.70 near my house. Yesterday, when I passed the gas station...$2.42. And, it's supposed to keep steadily dropping now that we've got our oil reserve that could double or triple in quantity.
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Old 09-15-2006, 03:26 PM   #4
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Ok...regular unleaded when I posted this above was $2.70 near my house. Yesterday, when I passed the gas station...$2.42. And, it's supposed to keep steadily dropping now that we've got our oil reserve that could double or triple in quantity.
Yup, dropped 30-40 cents around here for premium FINALLY!
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Old 09-15-2006, 05:37 PM   #5
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Last weekend down the street from my house regular unleaded was $2.17. Since then it has gone up a little to $2.22.

I live in northern Virginia.
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Old 09-15-2006, 09:43 PM   #6
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Ummm....don't want to say anything for fear of jinxing the gas prices 'round here.
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Old 09-16-2006, 02:16 AM   #7
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Ummm....don't want to say anything for fear of jinxing the gas prices 'round here.
Ok, down another 3 cents since yesterday to 2.39 for ... regular. But, Super, which is all I put in my SS, has still gone down from $3. to $2.59. That is too cool to see prices continuing to drop like this.
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Old 09-16-2006, 03:46 PM   #8
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I just filled up my saturn for 2.29.
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Old 09-18-2006, 09:12 AM   #9
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$2.01, $2.03, $2.05 at the three closest stations to my house for regular unleaded.
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Old 09-18-2006, 11:48 AM   #10
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$2.01, $2.03, $2.05 at the three closest stations to my house for regular unleaded.


That's what I'm talking about. Eventually, it'll get that low here too. Best price in SA is 2.25
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Old 09-18-2006, 01:25 PM   #11
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Think I'll go take the SS out and stretch "her" legs... And fill up while prices are reasonable.
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Old 10-28-2007, 04:28 PM   #12
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does anyone know when is the oil goin to be depleted?? at least for america
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Old 10-28-2007, 04:37 PM   #13
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Years ago people were predicting the oil supply would run dry within a few years. Then it never happened, so they guessed another date. It didn't happen then, so they guessed again, and so on. I figure we'll start favoring another fuel before petroleum runs out.
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Old 10-28-2007, 05:22 PM   #14
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Oil will never run out. Ever. It will be impossible to extract the last drop from the ground. Oil fields aren't underground lakes of gasoline. The stuff is traped in sand or porous rock. Its a mixture of diesel, fuel oils, gasoline, jet fuel, kerosene and more, commonly known as crude oil. Anyway, the reason why we will never run out of oil is because its like trying to get all the water out of a damp towel by wringing it out. You might get most of it out but never all of it. The current estimate is things will be depleted around 2040. But i don't think that considers advances in economy, increasing use (China and India), alternate technologies, undiscovered reserves, or tarsands (at least i don't think it includes them). Everybody thinks that the saudis have the most oil in the world. Not true. Its Canada, we have about 5 times as much as they do, mostly in tar sands. In fact, about half of the worlds oil is in tar sands. that might make a bit of a difference in the estimates. Besides, as demand increase while the supply decreases, the price will soar. High gas prices will reduce the usage and therefore demand, evening things out.

Also, while the price of oil is rising its not climbing as fast as everybody things. Why? inflation. Look back to the late 60's. How much did cars cost, 3000-4000 mostly. Now its 30 000 - 40 000 to buy the equivelent. The price of gas was what, $0.20-$0.25/gallon. Now its $3.50 or so. Accounting for inflation it would have been about $2.25/gal in modern terms. So yes it has increased, almost doubled. But that isn't nearly the 1000% increase people tend to think about.
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