Chevron Shareholders: The Big Winners?
Sept. 5 - KGO (KGO) -- Severin Borenstein, director of the UC Berkeley Energy Institute, says Chevron's new discovery is the direct result of new technologies that enable oil exploration companies to drill deeper.
Chevron reports its Jack-2 well breaks a drilling record going through 7,000 feet of water, and 20,000 feet below the sea floor making it the deepest successful test well in the Gulf of Mexico. Some of the new drilling technologies did not exist just three or four years ago.
The test well is producing about 6,000 barrels of oil a day, and if the field is fully developed experts predict it could be producing as much as a million barrels a day. Chevron is only 50-percent owner of the venture, and there's no guarantee all the oil produced would go to the United States. It's just as likely the oil could be sold at the best price on the world market. Borenstein says with the potential of producing one percent of the world's production, this field could push the price of crude down somewhat, but not enough to fundamentally change the world oil market.
Another issue is how cost effective will it be to pump out the oil? It's already going to be expensive to drill at that depth, but it would cost more to produce the oil if it does not flow easily. Initial indications are it will, and therefore it's expected to be a very cost effective venture. The big winners according to Borenstein are Chevron shareholders. The stock price did rise nearly three percent today.
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