BP (NYSE:BP) has started up production from the Galapagos project in the deepwater Gulf of Mexico, demonstrating yet again that this offshore area is a vital part of the future domestic supply of oil.

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BP just reported the start of production from the Isabela, Santiago and Santa Cruz fields located in the Mississippi Canyon area of the Gulf of Mexico. This phase of development involved four production wells at these fields, which will be connected to the Na Kika platform.

The Na Kika platform handles production from nine different oil and gas fields located nearby and was built in 2003 at a total cost of roughly $1.5 billion. The platform is operated and 50% owned by BP, with Royal Dutch Shell (NYSE:RDS.A, RDS.B) owning the balance of the platform. BP plans to ramp up the Na Kika platform to its full productive capacity of 130,000 barrels of oil per day by the end of June 2012. The Isabela field is operated by BP, while Noble Energy (NYSE:NBL) operates the Santiago and Santa Cruz fields.

BP has an extensive exploration and development program planned for the Gulf of Mexico and will spend approximately $4 billion here annually here over the next ten years. The company has interests in more than 650 offshore leases.

SEE: A Primer On Offshore Drilling

Other Operators
Anadarko Petroleum (NYSE:APC) is active in the deepwater Gulf of Mexico and holds nearly a 67% interest in Walker Ridge block 792, where the company plans a three well exploration program. Anadarko Petroleum recently drilled the Spartacus well, the first prospect on this block, and reported the well as non commercial. Apache Corporation (NYSE:APA) holds a 33% interest in this block.

Cobalt International Energy (NYSE:CIE) also struck out on a recent well in the deep water Gulf of Mexico. The company reported that the Ligurian #2 exploratory well on Green Canyon Block 814 was non commercial and would be plugged and abandoned. The well was targeting a number of Miocene formations.

Cobalt International Energy is not letting one failure disrupt the company's exploratory drilling program and plans to start drilling the North Platte #1 exploratory well in the third quarter of 2012. The company estimates that the entire North Platte area holds between 400 million and 850 million barrels of oil equivalent of gross unrisked resources.

The Bottom Line
The deepwater Gulf of Mexico has an abundance of oil and gas resources that many operators have developed and brought onto production over the last decade. The Galapagos project is the latest success by the industry and indicates the importance of this area to the U.S.

At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.

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