U.S. Gulf Oil Discovery May Spur Lawmakers to Act

Published Sep 15, 2006 12:01 AM by The Maritime Executive

The potentially massive oil discovery reported in the offshore waters of the Gulf of Mexico has Congressional lawmakers pressing the case for opening up more offshore areas to oil and gas leasing, exploration and development. The oil discovery, announced last week by Chevron and its partners, strengthens the case for enacting a version of US Outer Continental Shelf leasing reforms, S. 3711, which passed the full Senate by a 71-25 vote on August. 1. That bill will now go to conference later this month to be reconciled with the House version, HR 4761, which the House approved by a 232-187 vote on June 29.

Last week, it was reported that initial test results from a deep-water well in the Gulf of Mexico could indicate a significant oil discovery and eventually represent the nation’s biggest domestic energy find since production started from the Alaskan North Slope fields in the 1970’s. Chevron, along with Statoil ASA of Norway and Devon Energy Corporation, announced the promising oil find on Tuesday. Although the full potential of the field has yet to be fully defined, industry observers are saying that the discovery could boost U.S. oil and gas reserves by as much as 50 percent.

The test well sustained a flow rate of more than 6,000 barrels of oil per day, according to Statoil. The Wall Street Journal reported that Chevron and Statoil officials had estimated that the region could hold more than 15 billion barrels of oil and gas reserves. The well was drilled at a location approximately 270 miles southwest of New Orleans. Chevron maintains a 50 percent stake in the field and Statoil and Devon each own 25 percent.

While Senator Mary L. Landrieu (D-LA) has called the discovery “great news for achieving American energy independence and especially great news for Louisiana's offshore energy industry and the future of deepwater production,” the future of offshore US Gulf oil exploration is still very much in doubt. Reconciling the aggressive House version of the offshore drilling legislation with a more conservative Senate bill will not be easy. Also casting an early shadow on the negotiations is the call from Louisiana’s Governor for a marked increase in Louisiana’s share of royalties from offshore drilling.