Chevron says Gulf drilling a success

Well could become the nation's biggest new domestic source of oil,
according to newspaper report. September 5 2006: 12:36 PM EDT

NEW YORK (Reuters) -- Chevron Corp. said Tuesday it had successfully
drilled for oil in the Gulf of Mexico's deep waters, in what could be
one of the most significant finds for the domestic oil industry in a
generation.

The successful well, known as Jack 2, reached a record total depth of
28,175 feet, coming in 7,000 feet of water and more than 20,000 feet
under the sea floor. Analysts said the find suggested the success of
that drilling may mean more oil than previously believed is available
under the Gulf of Mexico, a region that already provides a quarter of
U.S. output.
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One published report suggested the breakthrough could increase U.S. oil
reserves by as much as 50 percent.

During the test at record depths and pressure, the Jack No. 2 well
flowed at more than 6,000 barrels of crude per day, Chevron (Charts)
said. That puts it on a par with discoveries in exploration hot spots
such as the waters off Angola.

With U.S. oil output in decline, big new fields are increasingly rare,
and oil companies are widening their search to more difficult places

Chevron, the No. 2 U.S. oil company after Exxon Mobil (Charts), did not
give an estimate of the field's reserves.

The Wall Street Journal cited Chevron officials as estimating recent
discoveries in the Gulf of Mexico could hold as much as 15 billion
barrels of oil and gas reserves. That would boost U.S. current reserves
by 50 percent.

The region could become the nation's biggest new domestic source of oil
since the discovery of Alaska's North Slope more than a generation ago,
the Journal said.

"This region is proving quite prospective. Certainly the test well
results are on the top end of most analysts' ranges," said Jason
Kenney, an analyst at ING in London.

Mike Wittner of investment bank Calyon cautioned that until the size of
the field was known it was difficult to draw conclusions.

"It seems to be a significant find and there is still life left in the
deepwater Gulf of Mexico, particularly as you move into ultra-deep
water," he added.

Chevron is the operator of the Jack prospect with a 50 percent working
interest. Devon Energy (Charts) and Statoil (Charts) each own a 25
percent working interest.

"The results of the Jack test allow Chevron and its co-owners to better
understand the deliverability of the emerging lower tertiary trend, a
trend where Chevron is the largest leaseholder," said Gary Luquette,
Chevron's President, North America Exploration and Production.

Chevron was not immediately available for further comment.

Chevron first announced the discovery of the Jack prospect in September
2004. It is 270 miles southwest of New Orleans and 175 miles offshore.
The test on Jack 2 broke Chevron's 2004 Tahiti well-test record as the
deepest successful well test in the Gulf of Mexico.

More than half a dozen world records for test equipment pressure, depth
and duration in deep water were set during the Jack well test, Chevron
said.

Chevron and its co-owners plan to drill an additional appraisal well in
2007.

Chevron said it is the largest leaseholder in the deepwater Gulf of
Mexico and is currently developing the $3.5 billion Tahiti project,
scheduled to commence production in 2008.
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Patrick