A consortium led by Anadarko Petroleum Corp. said it had discovered oil off the coast of Sierra Leone, potentially opening up a vast new petroleum province in the deep waters off West Africa.
It is the latest in a string of deep-water finds spurred by advances in drilling technologies and exploration strategies that are changing the face of the oil industry. It comes in the same month BP PLC announced it had made a "giant" new oil discovery below the Gulf of Mexico after drilling what is thought to be the world's deepest well. That field is estimated to contain three billion barrels of oil, although only a fraction of that may ever be extracted, BP said.
The steep run-up in the price of oil over the past few years has swelled Western oil companies' exploration budgets and encouraged them to push into high-risk areas once considered too costly to exploit, such as the Arctic, and the ultra-deep waters offshore Brazil.
Twenty-five years ago, oil companies struggled to operate in seas deeper than 600 feet. Now technological innovations mean they can pump crude in waters 6,000 feet deep. Anadarko's well in Sierra Leone, known as Venus B, was drilled in water more than a mile deep.
Some observers say the string of recent discoveries, especially BP's, has undermined the theory of "peak oil" -- the idea that the world's oil production is about to peak -- since improving technology is constantly opening up new frontiers for Big Oil. BP's Gulf of Mexico find was "good evidence the concept behind peak oil is flawed," says Adam Sieminski, chief energy economist at Deutsche Bank.
Though much of the crude stored below ultra deep water is hard to extract, "if demand is there for the product, technology and prices will make it possible to develop that oil," he said.
The shift to ever remoter areas comes as Western oil companies are increasingly shut out of the world's richest oil provinces like the Middle East and Russia. But the new oil plays often present challenges that push the majors' technological abilities to the limit.
Brazil's subsalt reserves, for example, are the largest discovery in the Western Hemisphere in three decades, but they are buried under a thick layer of salt miles below the ocean floor that shifts under geological pressure, making them extremely expensive to develop.
West Africa's appeal has run high ever since Anadarko and its partners discovered the vast Jubilee oil field offshore Ghana in 2007, which is believed to contain up to 1.8 billion barrels of crude. But the find announced Wednesday suggests the coastal waters stretching some 700 miles to the west, beyond Ghana to Ivory Coast, Liberia and Sierra Leone, could hold many more Jubilee-like structures, marking the region out as a potentially eye-popping new oil frontier.
The companies haven't said how much oil they believe the new Venus site contains.
Houston-based Anadarko's share price rose 9.6% in 4 p.m. trading in New York as investors digested the news. Tullow Oil PLC, the U.K.-listed oil explorer that has a 10% interest in Venus, closed up 9.2%. Repsol-YPF SA of Spain and Australia's Woodside Ltd., which each hold 25% stakes in the consortium, were up 1.2% and 4.8% respectively.
"There have been absolutely no discoveries in this basin before, so it's very significant news," said Stewart Williams, an analyst at oil consultancy Wood Mackenzie.
Anadarko and Tullow have long claimed that the geological trend discovered at Jubilee extends hundreds of miles westward. They quickly bought up exploration acreage all along the West African coast, and Anadarko now has eight million acres across 10 blocks in Sierra Leone, Liberia, Ivory Coast and Ghana. The company claims Venus proves its theory was right.
"It really confirms that the same play that we saw in Ghana and pursued through these 700 miles is present, and now de-risks an awful lot of that area," said Bob Daniels, Anadarko's head of exploration, in an interview.
Anadarko says it now has 30 identified prospects along this frontier -- areas where oil and gas are predicted to exist in significant quantities -- and will start drilling off the Ivory Coast once it has wrapped up at the Venus site.
Some analysts stressed the high risk a "wildcat" well like Venus carries, and said it was too early to say how much oil the Sierra Leone field contains.
But the broader reaction was bullish. "Whereas Jubilee might have been considered a one-off, now there's a whole province that could potentially contain billions of barrels of oil," said Peter Hitchens, an analyst at financial-services company Panmure Gordon & Co.