Oil Companies Compete for Stake in Gulf of Mexico

N.Y. Times News Service

Two feet of rain had fallen around New Orleans at the height of last month's fierce Gulf storm, shutting down regular air service into the city, and still the oil executives kept coming. One group hired a private jet and then a helicopter.

Others had to abandon their car to wade through water up to their necks, holding their briefcases high to keep them dry.

The government was selling oil and gas leases in the Gulf of Mexico and a little derring-do to get to the auction site was a small price to pay for a piece of the action.

When the bidding was over at the Interior Department's Minerals Management Service office in the flooded suburb of Metairie, the executives had forked over $307 million for drilling rights _ nearly triple what the government had expected.

The Great Oil Rush of the mid-1990s is on, and in a most unexpected setting.

As recently as three years ago, many oil executives described the Gulf of Mexico as a dead sea, a played-out place where production could only fall and drilling for new reserves would be futile.

Now there is a growing conviction that the gulf holds reserves even larger than those in Alaska's Prudhoe Bay, the last huge domestic discovery. And no one wants to be left behind.

"There's a lot of money to be made out there," said John H. Miers, vice president of the Amoco Worldwide Exploration Business Group.

The intense bidding last month by Amoco and other industry giants like Shell, Mobil and British Petroleum shows just how much money is at stake _ and how alive the gulf has suddenly become.

Starting to dot the horizon are billion-dollar rigs that can bring oil up in waters that are thousands of feet deep. Shell is the acknowledged leader on that front.

Meanwhile, exploration ships like the New Venture ply the shallower waters, searching for overlooked pockets of oil and gas in older fields and new treasures long hidden under thick layers of salt that cover some parts of the gulf's bottom. A joint venture involving Amoco, Phillips Petroleum and Anadarko Petroleum has scored big in that area.

Behind the rebirth are broad technological advances in rig construction and prospecting techniques. One day recently, for example, the New Venture was trolling for oil 50 miles off the coast of Galveston, Texas, by using a pair of onboard supercomputers to turn seismic readings into three-dimensional models of deposits buried 15,000 feet beneath the gulf's floor.

Also pushing the turnaround has been the industry's slow progress in developing the huge reserves of the politically unstable former Soviet Union _ where today's oil rush was supposed to have taken place.

Having taken another look at prospects closer to home, industry executives are now smiling. Below all the layers of salt on the gulf's continental shelf and the inky mile-deep waters further out lie fields far exceeding the 12 billion barrels at Prudhoe Bay, according to some projections.

The gulf's deep-water reserves alone have been estimated as high as 15 billion barrels. Billions of barrels more are thought to be in the shallower waters.

"It will be the biggest thing since Prudhoe Bay _ there is no question about it," said John H. Lichtblau, chairman of the New York-based Petroleum Industry Research Foundation.

Oil production in the gulf will increase from about 900,000 barrels a day this year, or 17 percent of total domestic output, to about 1.6 million barrels a day by 2000, or about 28 percent of the country's output, according to Lichtblau's projections.

With the United States dependent on foreign sources for about half of its oil, a surge in gulf output would give the country some help against any moves by the Organization of Petroleum Exporting Countries to cut production and raise oil prices, now hovering at around $19 a barrel.

It should also give the oil companies more time in which to nail down the kind of contractual and legal protections that they would need before investing heavily in Russia and other former Soviet republics, where proven reserves already total about 57 billion barrels.

The industry will also profit from exporting the technological tricks that it is learning to play in the gulf. They may eventually be put to use in deep-water fields in the North Sea, parts of the Pacific and off the coast of West Africa, among other places. MORE

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