The BP blowout reaction a couple years ago put a lid on oil and gas development in the Gulf of Mexico that has yet to be fully lifted.  With oil over $100 today and the projections on prices looking scary for the economy and average Americans, a little good news is very welcome.

A midsize oil explorer and developer company called McMoRan has been working in shallow Gulf of Mexico waters, close to shore, but drilling very deep.  For years McMoRan has been ignored.  Until:

Chevron, the Big Oil Giant out of California caught on to the potential.  Chevron is so impressed there have been mentions of the little McMoRan company, a very rare thing in the Big Awl Bidness.  But Chevron is a California firm – sort of people oriented more than the others.

As a practical matter Chevron is practically beating the drum – by oil company standards. Chevron has begun promoting the Shallow Water Gulf of Mexico (SWGM) as one of its top three areas of geologic interests worldwide.  Keep in mind Chevron is a major firm from the U.S. to Australia, across Africa, central Asia and South America.  If SWGM is in the top three, the prospects must be huge.

This is significantly important – an earlier well called Blackbeard East turned out to have a formation measuring 300 feet thick and appears to be a hydrocarbon bearing fractured carbonate.  A huge percentage of the world’s most prolific oil and gas deposits have been found in fractured carbonate structures.  Fractured carbonates sometimes naturally give up their deposits very easily. This could be a major discovery.

Fractured Carbonate Surface Exposure in the Pyrenees Mountains

Chevron is also very well positioned.  Chevron started a well late last year onshore in Cameron Parish, LA called Lineham Creek with a proposed total depth of 29,000 feet targeting the Eocene and Paleocene objectives below the salt structure.  The oil lease is a bit historical on land known as the Rockefeller Preserve that was donated to the State of Louisiana years ago.  The Rockefellers kept the royalty rights on the land and passed them to Chevron.

McMoRan’s lead guy, Jim Bob Moffett, isn’t being ignored anymore – the company’s expertise in SWGM is quite important now.  Five years of success has value with the current demand for more production.  Chevron invited McMoRan to partner in its well.  This is a big deal – significant in that Chevron wanted MMR to join the project as an equal partner.  McMoRan has negotiated a 36% participation and Chevron is also partnering with McMoRan’s partners EXXI for 9%, and W.A. “Tex” Moncrief for 5%.

This information points to some important facts.  The new well is located halfway between (on an east/west axis) McMoRan’s Davy Jones well and Chevron’s Bear Hump well which has been completed and is now being evaluated.  The McMoRan well follows projects called Blackbeard West, Blackbeard East, Lafitte, and the Davy Jones.  That experience is now critical for anyone looking for petroleum in the general area and at the depths below 20,000 feet that have become the new exploration frontier.

This month Bobby Ryan, Chevron’s VP of Global Exploration, spoke at another oil and gas conference about their enthusiasm for the SWGM and the work they are doing with McMoRan.  Ryan pointed out the deep drilling is a new effort in an already matured basin.  Chevron already has major acreage from wells drilled long, long ago and that are still producing to retain the leases.  Chevron it seems, has a royalty share in the McMoRan Davy Jones well.

In an odd twist, Chevron has also obtained access to the Davy Jones well logs, geological evaluations and interpretations, which would not normally be available to a royalty interest holder. Yet Mr. Moffett has made it quite clear he intends to bring in a partner with very deep pockets to help develop these ultra deep wells. It all makes sense now and appears to be getting underway very quickly.  It looks like Chevron and McMoRan are in for a long-term close association deal.

For decades experts have assured that there was nothing to find deep in SWGM.  But now we’re finding the formations have natural gas and it looks clear the reservoirs extend onshore.  That old assurance looks awful far off the mark now.  Just what the production rates might turn out to be isn’t being released yet, but the executive excitement and deal making is based on hard info prepared by reserve engineers that are heavily scrutinized.

For consumers this is great news from an additional viewpoint.  The SWGM work is in an area where there are existing pipelines to carry the new reserves to market right away. Billions of dollars will not have to be spent over the coming years and interminable waits to get permitting are avoided.  This discovery and development isn’t vulnerable to a crass political presidential delay.

Congratulations!  Go McMoRan and Chevron!


8 Comments so far

  1. » Pre-game show - Le·gal In·sur·rec·tion on February 22, 2012 3:00 PM

    […] A New Gulf of Mexico Oil Field Find May Be a Giant. […]

  2. Dick Roberson on February 23, 2012 12:02 PM

    Well done! Uninformed investors should take note. Development could be a major link in our economic recovery. O.P.E.C. could have a problem in the future as we work to eliminate their 50% of our energy supply. MMR, EXXI, CVX, PXP, and TISDZ should all benefit.

  3. Holistic Hypnosis & Hypnotherapy - Los Angeles on February 24, 2012 1:34 AM

    Veryyy interesting. The gas and oil industry in the USA is expanding at a dizzying speed. Let’s hope the value created will overtake debt creation by the government.

  4. Roy Cobden on February 24, 2012 2:48 AM

    “Let’s hope the value created will overtake debt creation by the government.”

    That might require something even faster than ‘dizzying speed’.

  5. linda on February 24, 2012 7:39 PM

    isn’t chevron venezuelan?? or am i confused? seems to me american companies get very little oil from their own coastline, and that that we do get is sold to other nations instead of used here at home…..this is ridiculous……drill here drill now is a good slogan, what about drill here and sell here too

  6. A New Gulf of Mexico Oil Field Find May Be a Giant | New Energy … | Gulf Coast Rising Live News on February 25, 2012 12:10 PM

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  7. LaRueJD on February 26, 2012 5:53 AM

    There is a lot of mis-information in this artical. The Rockelfeller lease is a game preserveoverseen by the state with supervision by the US Fish and Wildlife Service. All funds go to maintaing the preserve (there is a trust) and purchasing addition wetlands. The original grant was 86,000 acres but about 10,000 acres have been lost due to beach errosion. I drilled wells there in the seventies for Pennzoil to a depth of 17,000 ft. The production was mainly gas with some natural gas liquids. Chevron or McMoran do not hold any special rights here, they just happen to be the present lease owners. With gas at 2.50 per MCF there is no way a gas reservoir below 20,000 can be economic. This is exploration for the future. Convert you gasoline burner to LPG or Butane, they will be the cheapest energy in the US for decades to come.

  8. LaRueJD on February 26, 2012 5:59 AM

    Chevron has it’s headquarter in Califoria but I would not call them a california company. The absorbed Texaco which gobbled up Getty so their ar a lot of Texans in the upper ranks including fellow Aggie John Bethancourt. Venezuelan tey are definately not, that is Fina.

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