BP drilling Gila well near Tiber prospect in Gulf of Mexico

BP Plc has begun drilling near another large-scale "giant" discovery in the Gulf of Mexico as part of a wider campaign to scope out better prospects, a senior executive said on Monday.

Lamar McKay, the company's global head of exploration, production and development, said BP was drilling an exploratory well in its Gila prospect in the Lower Tertiary trend, the Gulf's deepest, most challenging and most promising play estimated to hold up to 15 billion barrels of oil.

Gila is next to BP's Tiber discovery, which the company touted in 2009 as "giant" and comparable to Kaskida, another BP field in the Lower Tertiary that could hold up to 3 billion barrels of oil.

BP had been slated to drill Tiber in 2010, but those plans were postponed when the U.S. government temporarily blocked new drilling in 2010 shortly after BP's Macondo well ruptured in the worst-ever U.S. oil spill.

BP's drilling plans for 2013 include an appraisal well for Tiber, but McKay told reporters at the annual Offshore Technology Conference in Houston that Gila was first and "Tiber is probably in the cards for 2014."

He said Tiber drilling hadn't necessarily been delayed and the company is drilling an exploratory well at Gila first. An exploratory well helps producers see if oil exists in a field, while an appraisal well helps them gauge how much is there.

"The exact plans have not changed all that much actually. Our strategy is to now understand the quality of prospects, reservoir properties and their potential, and then decide how to prioritize the program going forward," McKay said.

He said BP would decide where to drill next in that play, which could be Tiber, once the company evaluates results of the Gila well.

Promising prospects, such as Gila and Tiber are underway despite rising development costs, which McKay warned may prompt delays in some projects.

The company already has said its biggest new oil project in the Gulf, the Mad Dog Phase 2 development of its Mad Dog field, was under review because of rising costs from industry inflation.

BP intends to move forward with Mad Dog 2, but is reworking the plan to do so.

"We may have to step back and hit the pause button for a period of time," McKay said on Monday of projects facing rising costs. "It's stretching the resources in the business, in the industry."

He added that such inflation hits harder for bigger, more costly projects like those in deepwater that can cost $5 billion to $10 billion.

By contrast, onshore shale and tight oil and gas activity can grow or shrink much more quickly in response to such market conditions, he said.