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Heavyweights of the black stuff size up the competition

Times Online

September 10, 2009

David Wighton: Business Editor’s Commentary

Size matters. In the oil industry, your worth is measured in hundreds of millions of barrels and yesterday BP and BG Group were standing at the bar sizing up each other’s discoveries.

Last week, BP was crowing about Tiber, an offshore discovery at record depths beneath the Gulf of Mexico, with between 4 and 6 billion barrels of oil in place. Yesterday, BG was yesterday claiming that Guara, another deepwater prospect, this time off the coast of Brazil, was bigger.

A joint development with Petrobras, it might contain up to 2 billion barrels of recoverable oil, the difference being that BP may only recover 500 million barrels from Tiber.

These are what oilmen call elephants or supergiants. At this stage, assessing what is actually there is finger in the air stuff.

If you asked a director of BG or BP how many of these billions of barrels they would sign off in a share listing document today, the answer would be zero.

More wells must be drilled.

Nevertheless, BP and BG are generating excitement about new oil frontiers and the noise contrasts with relative quiet elsewhere.

Shell has been doggedly spending and drilling since its reserves scandal of five years ago and is filling its tank but spectacular finds are lacking.

After the reserves debacle, Malcolm Brinded boldly set out plans to drill 15 “Big Cat” prospects but we never heard these lions roar. To be fair, exploration is a cycle of many years between securing acreage, surveying and drilling wells. However, Shell made some strategic mistakes in ignoring Angola and failing to push more aggressively into the Gulf of Mexico.

In July, Peter Voser, Shell’s new chief executive, said the company had found 700 million barrels in the first half and it made another Norwegian discovery.

Gro is a gasfield that might contain between a modest 353 billion cubic feet of gas or an impressive 3.5 trillion cubic feet. Small cat or big elephant?

TIMES ARTICLE

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