Nexen and Shell announce new oil in Gulf

Calgary-based Nexen and oil major Royal Dutch Shell have announced a "significant" oil discovery in the eastern Gulf of Mexico.  The companies have reported a deep water oil find "with excellent reservoir quality" at Appomattox, located in Mississippi Canyon blocks 391 and 392, following the drilling of an exploratory well and two appraisal sidetracks. The discovery well was drilled to a depth of 7,500 metres and encountered about 160 metres vertical thickness of oil pay. The discovery, which offers the possibility of joint development, is the third made in the immediate area by the partners following earlier discoveries at Shiloh and Vicksburg. There are plans to follow up with additional appraisal activities later this year. It is thought that Appomattox looked significant enough to be a hub, which could sustain production infrastructure for other satellite discoveries to tie into. The development of three and four dimensional seismic and deep water drilling possibilities below 3,000 meters have recently opened up access to deep water deposits in the Gulf region. Deep water wells in the area typically cost between US$70 million and $100 million to drill. The Gulf region is attractive to oil and gas majors because it carries less of the risks associated with resource nationalism, which plagues many oil-rich nations. Nexen holds a 20 percent interest in Appomattox and Shiloh (which was discovered in 2003), and a 25 percent interest in Vicksburg (discovered 2007). Shell, the operator, owns the remaining interest of all three prospects. "The Appomattox discovery confirms our confidence in the play and provides a strong basis to evaluate the remainder of our significant acreage position in the Eastern Gulf of Mexico," said Marvin Romanow, Nexen's president and CEO, commenting on the find. "We are looking forward to additional drilling at Appomattox to confirm the estimate of total resource and move the discoveries towards development." David Lawrence, executive vice president of Exploration at Shell added: ÔÇ£This discovery builds on a successful 2009 exploration program in the Gulf of Mexico, where Shell had┬á discoveries at West Boreas, Vito and Cardamom Deep. ÔÇ£Shell has the technology, the expertise and a skilled, motivated workforce to expand oil and natural gas production in the US and worldwide.ÔÇØ Nexen is an independent energy company focusing on oil sands and unconventional gas in Western Canada and conventional exploration and developmentÔÇöprimarily in the North Sea, offshore West Africa and deep water Gulf of Mexico.