Petrobras (NYSE:PBR) announced the start of production from the Chinook Field in the deepwater Gulf of Mexico, providing us with more evidence of the abundant oil and gas resources present in this area.

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Overview
Petrobras is one of the largest oil and gas companies in the world, with average daily production of 2.55 million barrels of oil equivalent (BOE) per day in July 2012. Although the company's operations are concentrated in Brazil, Petrobras has diversified over the last decade and has operations in 28 countries. The company has budgeted $236.5 billion in capital spending in 2012 and has 980 projects in its portfolio.

Greater Chinook Area
The Greater Chinook Area consists of the Chinook and Cascade Fields, both of which are located in the Walker Ridge area of the deepwater Gulf of Mexico. Petrobras is using a floating, production, storage and offloading platform to handle production from these two oil and gas fields, marking the first use of an FPSO in U.S. waters. The FPSO has capacity to handle production of 80,000 barrels of oil and 17.6 million cubic feet per day.

SEE: Oil And Gas Industry Primer

Chinook Field
BHP Billiton (NYSE:BHP) made the first discovery at the Chinook Field in July 2003, after drilling an unsuccessful well at a shallower depth in 2000. BHP Billiton sold its interests in the Chinook and Cascade Fields in 2006, and Petrobras operates and owns 66.67% of this field. Total SA (NYSE:TOT) is a non-operated partner and holds a 33.33% share. Petrobras reported first production from the Chinook Field in early September 2012 and said that the Chinook #4 well targeted Lower Tertiary formations at the field.

Cascade Field
The Cascade discovery well was drilled in water depths of approximately 8,143 feet and found oil pay in April 2002. Production from the Cascade Field started up in February 2012 and is also producing from Lower Tertiary reservoirs. Petrobras is the operator of the Cascade Field and owns a 100% interest.

BW Pioneer
The BW Pioneer is the first FPSO to be used in the deepwater Gulf of Mexico and was built by BW Offshore, a subsidiary of BW Group. The BW Pioneer is almost 800 feet long and can store 500,000 barrels of oil. The FPSO is moored in 8,200 feet of water and can be disconnected in the event of a storm or other severe weather. Petrobras will operate shuttle tankers that will transport crude oil from the FPSO to refineries in the Gulf Coast. The company felt that this would be safer and less expensive than building a pipeline. Natural gas production at the fields is being transported by pipeline from the FPSO to a larger pipeline system about 54 miles away.

Other Operators
Devon Energy (NYSE:DVN) and Hess Corporation (NYSE:HES) also owned interests in these fields but divested them prior to the start of production.

The Bottom Line
The Gulf of Mexico is blessed with large amounts of oil and gas resources and the industry is slowly developing these assets and bringing them onto production. Projects like Cascade and Chinook will eventually lessen our dependence on foreign sources of energy and bring us a little closer to being energy independent.

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

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