Shell weighs drilling in new Gulf oil field

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HOUSTON — Shell Oil Co. officials are evaluating whether to launch a production program in the eastern Gulf of Mexico after a third sizable oil discovery in the region, the company said Tuesday.

The find at the company’s Rydberg exploration well could contain 100 million barrels of oil equivalent, the company said. Along with two other discoveries nearby, it represents Shell’s second-largest play in the Gulf of Mexico

‘‘We feel pretty confident we’re on top of this play,” said Mark Shuster, Shell’s executive vice president for exploration, in an interview following Tuesday’s announcement. “It’s exciting.”

The company plans further drilling, and Shuster said Shell’s development team is evaluating options. “How development will play out still needs a little work,” he said.

Analysts said one possibility would be to tie the three finds and potential future discoveries into a single production platform.

The find announced Tuesday is in an area called the Norphlet, an unusually large geological formation that lies under parts of Alabama, Arkansas, Florida and Mississippi and extends into the Gulf.

Houston-based Shell Oil is the U.S. arm of Royal Dutch Shell, headquartered in the Netherlands.

Its trio of recent discoveries are in the eastern Gulf of Mexico, south of Mobile, Ala. The Rydberg well is 75 miles off the coast in 7,479 feet of water. Combined, the three finds encompass a resource base of 700 million barrels of oil equivalent, Shell Oil said.

Within Shell’s Gulf of Mexico portfolio, that’s second in size only to its Mars basin, which lies to the west of the Norphlet and contains an estimated 1 billion barrels of oil equivalent, according to a Shell spokeswoman.

The group of discoveries probably will rank among the five largest resource bases in the Gulf of Mexico, said Jackson Sandeen, upstream Gulf of Mexico analyst at Wood Mackenzie,

The Rydberg find marks the first discovery by a partnership comprising Shell, an affiliate of China National Offshore Oil Corp. and the U.S. affiliate of Colombia’s Ecopetrol.

Even without the Rydberg discovery, Mr. Sandeen said, Shell’s two previous Norphlet finds probably would have justified investing in future production in the area, and the latest discovery makes the case even more compelling.

Other energy companies have explored offshore in the Norphlet, including Murphy Oil, Marathon Oil and BHP Billiton, said Justin Devery, a deep-water Gulf of Mexico analyst with IHS. But Shell has been the most active, he said, and was one of the first. ‘‘It was just a play nobody thought would extend this far out in the Gulf of Mexico,” Mr. Devery said. “When Shell investigated it, that was the quantum leap.”

Mr. Shuster, the Shell executive, said energy companies searching for natural gas first drilled in the Norphlet onshore about 25 years ago. But Shell believed that it could extract oil from part of the Norphlet that extended into the ocean and began leasing offshore blocks over the formation in 2001. The company began exploration drilling two years later. With the help of technological advancements including improved seismic sensing, it made a major discovery in 2010 at a site called Appomattox, believed to contain 500 million barrels of oil equivalent.

Last year, Shell announced the nearby Vicksburg discovery containing an estimated 100 million barrels of oil equivalent. Noble Corp.‘s Globetrotter I drillship, which drilled at Rydberg, soon will begin exploration wells at a site called Gettysburg.

The sites, named by a geologist with a keen interest in the Civil War, are located within about a dozen miles of each other.

Mr. Shuster said it can take from three years to nearly a decade for production to begin following a Gulf of Mexico discovery. “Right now, we want to keep our options open,” Mr. Shuster said.

United States - North America - Texas - Europe - Western Europe - Houston - Netherlands - Marathon Oil Corp - Gulf of Mexico


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