Will BP's Tiber Discovery End Oil Imports? Nope.

It’s all over the papers this morning: BP (formerly BP-Amoco, formerly British Petroleum) has officially announced what’s been a poorly-kept secret in the halls of Houston for weeks; a potential three-billion-barrel oil field in the waters of the Gulf of Mexico, 250 miles southeast of the Bayou City. The conservative pundits on AM Radio and FOX will be howling with glee this afternoon; and I can already hear Sarah Palin sitting on that porch with a view of Russia chortling, “I told you to let ‘em ‘Drill, baby, drill!’” A couple more of these, and America won’t have to kowtow to them Ay-rabs or that commie Chavez any more! Energy Independence is upon us!

But before you trade in that Escape hybrid on a new Unimog, maybe you’d better take a deep breath and consider some facts.

Fact 1: BP’s discovery, called Tiber, was drilled in the area known as Keathley Canyon, in some 4132 feet of water. The well penetrated another 35,055 feet of rock to reach its target (Lower Tertiary rocks, if you care). That means the discovery well has a total depth of 39,187 feet – deeper than any current oil production in the world. For reference, the 35,055 feet of rock between the sea bottom and the reservoir is a mile more than the total height of Mt. Everest.

Fact 2: This is the sixth discovery in this “trend” since 2000, including Shell’s Perdido discovery (in 10,000 feet of water) and Chevron’s Jack discovery in 2006. So far, there’s been no production. None, whatsoever – Shell predicts that Perdido development will begin in 2010.

Fact 3: Oil doesn’t just pour into tankers after it’s discovered like cows coming back to the barn at night. It will take billions of dollars of equipment and human talent to produce oil from a discovery this deep. In the case of Tiber, current technology very likely is insufficient to produce hydrocarbons from this depth; necessitating millions of dollars in research to develop this technology. Unless BP and its partners believe they can expect to turn a profit on oil produced from this field and others in the trend, the oil will stay in the ground. Most industry experts predict that the technology for production under these conditions will not be in place for a decade. The industry is well-funded and some of the brightest minds around are at work on solving the logistical problems involved in production at this depth – but until oil prices reach a level where the sale price exceeds the cost to produce a barrel of oil, it’s staying right where it is. Speaking of money, the “street” estimate of the cost to drill Tiber is over $250 million. And here you wondered where those "obscene" profits Big Oil made last year were going...

Fact 4: Energy independence it’s not. The USA imports between ten and eleven million barrels of crude oil every day. At 3 billion barrels and an estimated thirty-year lifespan, Tiber would produce an average of less than 300,000 barrels per day (although that would be front-loaded to an extent). Or, looking at it another way, US total consumption of crude oil averages between 19-20 million barrels/day. At that rate, three billion barrels is slightly less than a six-month supply.

Go forth and listen to your pundits, left or right – and remember that all of them are leaving out facts that don’t support their arguments.