ERHC Energy Inc (ERHE)

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OUSTON (AFX) - Chevron Corp said Monday it has completed its first exploration well off Western Africa's coast in a discovery that's reported to have as much as 1 bln barrels worth of oil and gas.

A Chevron official said the company is evaluating the results of the drilling, completed on March 15. The official declined to give specifics about the well, other than to say it's in waters of Sao Tome and Principe, a tiny archipelago nation near the equator in the Gulf of Guinea.

But initial geological studies of the well suggest there are around 1 bln barrels of recoverable reserves, according to a weekend report in The Business, a British newspaper, citing unnamed sources.

If the billion barrel mark holds true, it would put the discovery on par with the entire holdings of some large exploration and production companies, said Aliza Fan, senior equity analyst at John S Herold.

"That's a significant size," Fan said.

Even if the well found a thick column of oil, discoveries typically require several more wells to delineate the size of the field and its commercial potential.

For Chevron, a major discovery would come at a time when the San Ramon, Calif.-based company is struggling to expand its reserves. Its oil and gas holdings stood at 9 bln barrels of oil equivalent at the end of 2005.

Chevron acquired rights to explore the island nation's waters in October 2004 and began drilling Obo-1, the location of the well, last January.

It now has a 51 pct stake in the site, with Exxon Mobil holding 40 pct and the rest owned by Dangote Energy Equity Resources, a jointly owned Nigerian-British driller.

On Wall Street, Chevron shares were among the Amex Oil Index's top advancers on Monday, rising 1.1 pct to 58.21 usd. Exxon added 0.2 pct to 61.29 usd.

A former Portuguese colony, Sao Tome and Principe is eyeing its territorial waters in the oil-rich Gulf of Guinea as a way to transform its agrarian economy. It sold its first production licenses in 2004.

Ronald Gold, vice president of Petroleum Industry Research Foundation, said that while the Obo-1 discovery appears to be significant, it doesn't represent a big impact in market terms.

"When Prudhoe Bay was found [in Alaska], it was announced at 8 bln ... so 1 bln barrels is very nice but it's not going to change the world oil supply," said Gold.

The JDZ Block-1 is located approximately 190 miles north of the city of Sao Tome and approximately 125 miles from the city of Port Harcourt in Nigeria.

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