The biggest oil discovery in 38 years

Earlier this week a group of oil companies led by Chevron made a big oil discovery in the Gulf of Mexico called 'Jack'. The media has generally reported the new discovery very favourably. According to most reports, 'Jack' could...

• produce up to 400,000 barrels of crude oil per day
• hold up to 15 billion barrels, and boost US oil reserves by 50%
• be the biggest US oil discovery in 38 years, bigger than Prudhoe Bay in Alaska

Does this mean the end of America's dependence on foreign oil?

Think again. Lets look at 'Jack' in context of the USA's current oil requirements.

• The USA consumes 20 million barrels of oil per day. Jack's 400,000 extra barrels are not going to make much of a difference.
• The USA has oil reserves of 21 billion barrels. Saudi Arabia claims oil reserves of 262 billion barrels, Iran 133 billion, Iraq 112 billion, Mexico 100 billion ... In other words, it doesn't take a very large discovery to increase total crude oil reserves by 50% if you don't have much oil in the first place.

There are other reasons to be skeptical about Jack:

• The field is in 7,000 feet of water and a further 20,000 feet below the sea floor. Jack is pushing the outer limits of deep sea oil technology.
  

  "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 in a statement.
  

• Estimates of the size of the oil field range from 3 billion to 15 billion barrels -- a huge range.
• All estimates are in BOE or Barrels of Oil Equivalent, which means some (or most) of the 'oil' may in fact be natural gas.
  
• It is comprised of several smaller fields dispersed over a 300 square mile area, with no single field larger than 300 million barrels.
• The wells cannot be served by underground pipelines because of the depth of water. Rather, the oil will be pumped directly to tankers. Pipelines are faster and more efficient, and tankers will put a higher price and limit the amount of oil pumped out.
  
• Production will not start (at the very earliest) until 2010.
• Full production (at the very earliest) in 2013.

And remember this is the biggest oil discovery in 38 years! Don't buy that SUV just yet.

More references:
New oil find tests drilling's watery limits
Black gold in the Gulf
'Huge oil find' in Gulf of Mexico