Cramped on Land, Big Oil Bets at Sea By: Ben Casselman and Guy Chazan Presented by: Brandi, Cody, Seth, Kelly

Deep Sea Drilling Chevron is leasing the Clear Leader Floats in 4300 feet of water in the Gulf of Mexico Drills through nearly 5 miles of rock Rent: $500,000 per day Clear Leader is connected to a large platform Cost Chevron $650 million First phase of this project 10 years - $2.7 billion No promise of a payoff

Why? Iran – sanctions Iraq – violence Venezuela – assets seized Russia – curbs on foreign investment U.S.A – environmental regulations

Discover Clear Leader has been searching for oil 150 miles South of New Orleans. As Chevron and other major oil companies are moving further and further from shore they are discovering unexpectedly large quantities of oil.

Chevron’s wells from their latest Gulf of Mexico project are now producing 125,000 barrels of oil a day, making the project one of the gulf’s biggest producers. In September it was announced that a field in the gulf that is capable of holding up to three billion barrels was discovered.

As many of the giant oil fields of the past century are drying up, major discoveries are being made across the Atlantic. Companies have announced big finds off the coast of Brazil and Ghana. Experts are suggesting the existence of a massive oil reservoir stretching across the Atlantic from Africa to South America. Between 2005 and 2008, deepwater projects were producing 67% more oil, or 2.3 million more barrels a day.

For Western energy companies these discoveries mean taking back the lead in the quest for oil after a long decade of retreat. Challenging companies such as Petrobras, Anadarko Petroleum and Tullow Oil are having offshore success as well, mainly near Brazil and Ghana. The enormous amount of time and money required for these projects is forcing smaller companies to abandon their deepwater exploration business and focus on less expensive onshore projects.

Oil History 1890s – Prospecting from piers - - Santa Barbara, CA 1911 – First fully offshore well - - Oil City, LA Cedar pilings 1920s – Louisiana Bayous 1947 – First well not visible from land Gulf of Mexico

Driving need for alternatives Recent emphasis on deepwater exploration driven by: Stronger government control of their oil resources Traditional oil fields are drying up Global oil reserves fell in 2008 – 1st time in a decade Oil consumption has risen by 5.4 million barrels a day while production has risen only 4.8 million barrels a day Lead to increase in oil prices July 2008 - $150 a barrel December 2008 - $35 a barrel

Chevron’s Success and challenges Fastest growing oil company in 2009 Off Shore projects Gulf of Mexico Brazil Bought leases in the 1990’s Won a US auction in 1996 Seismic Imaging Ran into a thick layer of salt

Chevron’s Tahiti Project Spent $100 million dollars to sinks its first well The first Tahiti well struck black gold By 2005 they had enough information to move forward with the project Built 700 ft tall, 45,000 ton oil production platform $2 billion worth of expansion for the second phase of the Tahiti Project Still no guarantee of success