The Jack Field oil discovery was greeted by the American news media with euphoria. On September 6,2006, The New York Times carried this big headline, "New Oil Field in Gulf May Yield Billions of Barrels". Initial resource estimates touted by CNBC and other main-stream financial outlets declared that somewhere close to 15 billion barrels of oil and natural gas liquids are in the newly discovered Jack Field.
Clearly this was the biggest positive news to hit the American business world. Potential of this oil discovery could jolt the American economy and possibly lift a financial burden due to costly oil imports. Commodity markets reacted quickly. There was an immediate ripple effect on global oil prices.
Hoopla came to a quick end when knowledgeable oil people scrutinized this new oil find. First and foremost, a successful test well does not prove how much oil is actually in the ground. Determining an in-place reserve takes a highly skilled team of petroleum geologists more than just several months to calculate.
When drawing oil from extreme depths under the ocean bottom, problems arise from high pressures. Oil being pumped to the surface is very hot. It must be cooled before it is pumped onto a tanker vessel. Along with the hot pressurized crude there is a mix of natural gas. This must be separated and somehow stored, or shipped two hundred miles to the mainland. This is not an easy feat as natural gas is lightweight, bulky and not easy to compress.
Environmentalists immediately expressed their major concern. Jack Field is located in the midst of a direct path of category 3 and 4 hurricanes. The closest inland shore is 200 miles away. If a serious hurricane strikes it could be a multi-million dollar disaster
Financial analysts looked at the very high costs of developing this field. What will the production costs end up at? No one can be certain that this new oil find will be a profitable success even at current high crude prices.
Lets assume that all issues are addressed and there really is a potential reserve of 15 billion barrels of crude in Jack Field. Today the U.S. consumes about 22 MMbbls/day. By 2010, America will likely be consuming about 25 MMbbls/day. At that consumption rate, those 15 billion barrels of crude would only give the United States a 21 month supply!
