Chevron to Invest $7.5B for Deepwater Drilling

Drilling moratorium in the Gulf of Mexico lifted, Chevron (CVX) announced its plan to increase deepwater production in the region.

The nation's second-largest oil company said Thursday it has sanctioned development of the Jack and St. Malo fields, its first operated project located in the Lower Tertiary trend in the Gulf’s deepwater.

Located within 25 miles of each other, the Jack and St. Malo fields are located some 280 miles south of New Orleans in water depths of 7,000 feet. The fields are projected to contain more than 500 million oil-equivalent barrels.

The company will pay $7.5 billion to start its initial phase of development in the region, which will include three subsea centers tied to a hub production facility with a capacity of 170,000 barrels of oil and 24.5 million cubic feet of natural gas a day. Startup for the project is targeted for 2014.

“The Lower Tertiary is recognized as a huge resource with the potential for long life projects of up to 30 to 40 years and the opportunity to enhance recoveries through technology,” said George Kirkland, Chevron’s vice chairman.

As one of the top leaseholders in the Gulf, Chevron averaged daily production of 149,000 barrels of crude oil, 484 million cubic feet of natural gas and 14,000 barrels of natural liquids last year.

The move comes shortly after the US government lifted a deepwater drilling ban in the wake of BP's (BP) well rupture in April that led to the worst-ever oil spill and death of 11 workers.

Since the disaster, the government has been upping safety procedures and implementing new regulations aimed at preventing another spill of that magnitude. 

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