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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: Maurice Winn who wrote (72087)	1/18/2010 11:38:53 AM
From: Haim R. Branisteanu	Read Replies (1) \| Respond to of 74559

Natural gas under Gulf may be too much of a good thing The prospect of yet another new frontier for U.S. natural gas development, this time in super-deep wells beneath the Gulf of Mexico's shallow waters, is not all good news for Houston's energy sector. A big uptick in output from the emerging region — predicted this week after announcement of a major discovery there — would clearly signal new life for the heavily explored offshore region. But it could also boost already swollen U.S. gas supplies, weaken prices and keep producers on the sidelines. Such a scenario is unlikely to play out in the next year or two, given the time needed to develop the complex wells. But within three to five years, if output materializes and gas from other sources keeps rising, it “adds one more brick to the natural gas wall of worry,” said David Pursell, a managing director with local investment bank Tudor, Pickering, Holt & Co. Securities. “It could be meaningful to U.S. supply in a time frame when we really don't need more additions to supply,” he said. A team led by New Orleans' McMoRan Exploration Co. said this week it made one of the biggest discoveries in the Gulf's shallow waters in decades. The claim was based on results from a well, drilled in 20 feet of water to a depth of more than 28,000 feet, that found a 135-foot column of petroleum-rich rock at the Davy Jones prospect. Additional drilling will be needed to confirm the well's true potential, but the team said the early results suggest, even beyond Davy Jones, there is plenty more oil and gas to be found in the deeply buried layers of sediment. “Go back through the history of development in our business, and odds are, we've got more than one of these in front of us,” said John Schiller, CEO of Energy XXI, a Hamilton, Bermuda-based firm run from Houston that has a 16 percent stake in the project. Industry analysts had predicted that ultradeep gas plays in the shallow-water Gulf of Mexico would contribute to U.S. natural gas supplies over time. But the Davy Jones discovery is likely to accelerate activity in the region. Matt Snyder, lead analyst for Gulf of Mexico research at consulting firm Wood Mackenzie, had projected commercial production from the wells by 2017. Now, in light of the announcement, he said the firm will likely revise its forecast to 2014. The additional output could help arrest steep declines in natural gas production in the Gulf of Mexico in recent years. Gas production from the basin today is roughly 7 billion cubic feet per day, about half what it was in 2001. chron.com