June 8 (Bloomberg) -- Exxon Mobil Corp. announced it found the equivalent of 700 million barrels of oil beneath the Gulf of Mexico, the biggest discovery in the region in 12 years.
The estimated size of the Hadrian field may increase as drilling continues, Exxon said in a statement today. The discovery is about 250 miles (400 kilometers) southwest of New Orleans in 7,000 feet of water, Irving, Texas-based Exxon said.
Exploratory drilling began in 2009 at the prospect and the company had finished two wells when a record oil spill from BP Plc’s Macondo well last year prompted a U.S. moratorium on deep-water exploration. Exxon confirmed the find with a third well it began drilling on March 26 under new government safety rules designed to protect rig workers and the environment.
Exxon’s Hadrian discovery is the biggest in the Gulf since BP’s 1 billion-barrel Thunder Horse find in 1999, Mohammad Rahman, a senior analyst at Wood Mackenzie Ltd. in Houston, said today in a telephone interview. Exxon engineers now are drilling deeper on the third Hadrian well, which currently extends 23,000 feet beneath the sea surface, because they believe there is more oil to be found, company spokesman Patrick McGinn said during an interview today.
“This is a very, very significant find,” Rahman said. “When a supermajor like Exxon Mobil throws a number like 700 million at you, it indicates they are very confident in what they’ve got here.”
Gulf Crude Production
The Gulf accounted for 29 percent of U.S. crude production in 2009, according to the Energy Information Administration. Wells in water 1,000 feet or deeper accounted for 81 percent of the Gulf’s oil output last year, a 10-fold increase from 1991, according to the Bureau of Ocean Energy.
Exxon rose as much as 2.3 percent, the most since March 21. The shares gained 76 cents to $80.76 at 4:09 p.m. in New York Stock Exchange composite trading. Exxon has increased 11 percent this year, exceeding the 10 percent rise in New York crude futures during the same period.
“This is good news not only for Exxon but for the industry as a whole because it shows that the deep water still holds significant promise,” Gianna Bern, founder of Brookshire Advisory and Research Inc., a Chicago-based risk-management adviser, said in a telephone interview.
There were 27 rigs drilling wells in Gulf waters deeper than 1,000 feet as of June 6, according to the Bureau of Ocean Energy Management, Regulation and Enforcement, the Interior Department agency that oversees offshore oil and gas activity.
Exxon could have made the discovery sooner if the administration of President Barack Obama hadn’t been slow to issue drilling permits after the moratorium was lifted in October, said Representative Darrell Issa, a California Republican who leads the House Oversight and Government Reform Committee. The Bureau of Ocean Energy issued the first new deep-water drilling permit on Feb. 28, 4 ½ months after the ban formally ended.
“Today’s announcement is good news, but it cuts both ways,” Issa said today in an e-mailed statement. “Lost time is lost opportunity and the economic price has been paid by workers in the Gulf region and consumers at the gap pump.”
Exxon Chief Executive Officer Rex Tillerson in March announced plans to spend $100 million a day for the next half decade to expand the search for oil and natural gas in geologic formations previously regarded as impenetrable. The company’s exploration prospects extend from Greenland to Madagascar to Vietnam.
The Hadrian field is about 85 percent oil, based on data from three wells, the company said. Eni SpA and Petroleo Brasileiro SA also hold stakes in the prospect, according to the release.
Exxon is leasing A.P. Moeller-Maersk A/S’s Maersk Developer rig to drill into Hadrian. The 2-year-old vessel is equipped to drill as deep as 40,000 feet beneath the sea surface, according to RigZone, a research firm that tracks the offshore drilling industry.
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