Wildcatter hunch unlocks $1.5 tn in offshore US oil

Texaco Inc geologist Robert Ryan didn't suspect he was helping change the energy future of the Gulf of Mexico when he gave the go-ahead for a well that would break the world record for deep-water drilling.

The project known as BAHA, undertaken in 1996 by Texaco and its partners, Royal Dutch Shell Plc, Amoco Corp and Mobil Corp, was a dry hole. That normally would've made it a flop. Instead, BAHA's discovery of oil-rich sands where none were thought to exist was the first step in unlocking a $1.5-trillion trove of crude that's revived the prospects of a body of water many thought had long ago given up most of its fossil-fuel riches.

Just as technology has allowed explorers to tap vast new oil and natural gas supplies in onshore shale fields, it's now reinventing the Gulf. BAHA was the first deep-water well to try plumbing the Lower Tertiary, a layer of the earth's crust formed more than 25 million years ago after mammals had replaced dinosaurs as the dominant life form.

A series of recent finds in the ultra-deep has profoundly changed the thinking on US offshore geology, with 2013 seeing the Gulf of Mexico become one of the most promising frontier oil plays in the world and the fastest-growing offshore market.

New seismic equipment and computer power has allowed explorers to see into once-invisible layers of rock. Engineering innovations enable them to drill five miles into the earth through waters more than 10,000 feet deep, where temperatures are more than hot enough to boil water and high pressures approach the weight of four cars resting on one square inch.

Record output
The Gulf is heading for record deep-water output equivalent to almost 2 million barrels of oil a day in 2020, according to industry researchers Wood Mackenzie. The US estimates about 15 billion barrels of recoverable oil remain to be found in the Lower Tertiary.

While most US shale fields have now been identified and mapped, the Gulf is seen as having much bigger yet-to-be-discovered potential - 48 billion barrels of oil compared to the 13 billion barrels estimated for onshore and coastal oilfields, according to US data.

Investment is pouring in, with 42 drilling rigs operating in 1,000 or more feet of water as of September 9 -35 per cent more than four years earlier, according to US data on the Gulf. By the end of 2015, 60 rigs are slated to be working in the deep water off US shores, estimates Brian Uhlmer, an analyst at Global Hunter Securities LLC in Houston.