The Times-Picayune cover story today was all about BP's massive strike at the Tiber Prospect. The article, all and all, was pretty good. I've got a few things to add to it.
First off, Bloomberg also had a nice article. BP is claiming reserves of up to 8 Billion Barrels of Oil. 8 Billion Barrels is a hell of a lot of oil. The East Texas Field was about 6 Billion Barrels. The Forties, the largest North Sea oil field, is only 5 Billion Barrels. This is a truly large discovery...
BUT, (and there's always one of those hanging around out there) there has only been one appraisal well sunk so far. Until a second "step out" well is drilled, the estimates are just that: estimates.
The other thing to consider is how "reserves" have changed over the years. Right now, they're talking about 1/3 to 2/3 of the oil "preliminarily technically recoverable." Of that, they're not saying, but it seems that half that is economically feasible (we'll see about that). The fact that they're talking about this at all is surprising. Until recently, the SEC monitored all statements about new fields. Throwing out huge numbers like this based off a single well would draw their ire, possibly resulting in fines.
"Reserves" are what oil companies live off of. "Reserves" fall into two major categories: Proven and Possible. For oil to be considered "Proven", several test wells (generally at least 2-3) have to be drilled at specific intervals and flow tested for a specific duration. Up until very recently, "Proven" reserves were (generally) VERY, VERY conservative calculations. Now, the SEC has relaxed their rules. How much they have they relaxed? There's not enough data to really say. Some of the changes were probably good (for example, allowing unconventional oil, a la Oil Sands to be booked with the rest of the reserves instead of a separate category), while it remains to be seen how the rest will play out. On the other hand, there are always risks in the oil business. For example, one large field in Yemen was waterflooded (an enhanced oil recovery method) a little too aggressively and entire field collapsed. For another example, look at the ironically-named Typhoon TLP.
Most people in the oil business could scale up the conservative "proven" oil to come up with a pretty accurate guess as to how much the field will really produce. To give you an idea of what I mean, the largest platform (by production) in the Gulf is still(?)/was until very recently* Mars. It's peak production was 220,000 barrels a day. It was originally only allowed to book about 350 Million Barrels as "proven." It's produced much more than that in the 13 years since first oil. My best guess is that the new system will lead to a more accurate overall picture of the reserves, but for individual field analysis, Caveat Emptor.
The real test of Tiber will be when the second well is drilled. Will the Times-Picayune still put it on the front page?
NOTE: I've decided to break up this post for ease of reading. I've tried to make this post as informative as possible, but I'm drawing from a broad range of topics within the oil industry. If there's a mistake, please let me know.
* Mars set the record at 220,000 barrels/day. Thunderhorse will produce at 250,000 barrels/day when all wells are online. Thunderhorse had first oil in December of last year. I don't know how far along they are in bringing on production, hence the hedging.