Deep Water Oil Production

Everyone should read the article on deep water oil production in today's WSJ (5-Jan-2010). The online article is at: http://online.wsj.com/article/SB126264987791815617.html
You will only get the beginning of the article if you are not an on-line subscriber, but it is on the front page of the print edition. You can also sign up for two free weeks of the online edition.

The Thunder Horse Field in the Gulf of Mexico has been online for a year or so and is producing around 250,000 barrels of oil per day. The Tahiti project of Chevron in the Gulf came online last May and is producing about 150,000 barrels/day. In reality, this is not an increase in U.S. production but is only replacing the decreased production of Prudhoe Bay in Alaska. Bringing these deep water fields on line is terribly expensive. They estimate that the Tahiti project has cost $2.5 billion and has taken over 10 years to bring into fruition. But this is the future of oil production growth or replacement.

The largest deep water oil production comes from Angola (of all places) with around 1.5 million barrels/day. So in the U.S., we are just in the process of ramping up.

But a serious problem remains in Prudhoe Bay. The decline in production can result in the closure of the Alaskan Pipeline because a certain amount of flow is needed to keep it going. There is activity going on in the National Petroleum Reserve (NPRA) adjacent to Prudhoe Bay to the West to find medium-sized oil fields that could help (One in Prudhoe Bay has been found adjacent to NPRA that is being brought on line.). We seem to be unable to bring ourselves to explore the Alaskan National Wildlife Area (ANWR) to the East; however, there is the moderate Sour Dough Field in Prudhoe Bay that butts up against ANWR. Development of this field has been held up because of disputes between former Governor Sarah Palin and former President Bush over revenue sharing. I don't know whether there is any advance between the current state and Federal administrations.

(Reprinted from Post 316331 in Investment Analysis clubs/Macro Economic Trends and Risks of Motley Fool, 5-Jan-2010)