UPDATE 2-First oil well since BP spill starts production

* First new production since gov't drilling halt

* Marathon's well already drilled at time of BP spill

* Seen producing 50,000 boe per day at peak
(Adds confirmation that it is first production since halt,
updates share price)

HOUSTON, July 19 (Reuters) - Marathon Oil Corp's (MRO.N)
start of oil production from a deepwater well in the Gulf of
Mexico is the first since the U.S. government halted drilling
after the massive BP oil spill, officials said Monday.

Marathon's well, in 3,000 feet (914 meters) of water, was
already drilled at the time of the spill and awaited
completion, an oil field term for opening it to flows of oil or
gas.

The U.S. government's moratorium on offshore drilling
allows some activity, including well completion, to continue.

The U.S. Bureau of Ocean Energy Management, Regulation and
Enforcement confirmed Marathon's new production at its Droshky
project is the first since the federal government halted
drilling after BP Plc's (BP.N) (BP.L) well blowout.

The Droshky development began production on time and cost
less than its projected budget of $1.3 billion, Marathon said.

Marathon owns a 100 percent working interest in Droshky,
which is expected to produce about 50,000 net barrels of oil
equivalent per day at its peak.

The project consists of four development wells tied back to
the Bullwinkle platform. At a final development cost of less
than $900 million, the initial stage of development is expected
to produce 35 million of the estimated 60 million barrels of
oil equivalent (boe).

Future recovery will largely depend upon well performance,
the Houston-based company said.

Shares of Marathon rose 8 cents to close at $31.79 on the
New York Stock Exchange.
(Reporting by Anna Driver and Bruce Nichols in Houston;
Editing by Lisa Shumaker)