October 25, 2011 / 3:20 PM / 6 years ago

UPDATE 2-Hess developing Gulf of Mexico deepwater field

* Production to start in 2014

* Drilling to start next year

* Hess shares drop 1.9 percent; Chevron falls 1 percent

Oct 25 (Reuters) - Hess Corp said on Tuesday it would spend $2.3 billion with Chevron Corp to develop the Tubular Bells oil and gas field in the deepwater Gulf of Mexico.

Annual output is expected to peak around 40,000 to 45,000 barrels of oil equivalent per day, with production expected to begin in 2014. Drilling is expected to start next year, New York-based Hess said.

Tubular Bells, located about 135 miles southeast of New Orleans in the Mississippi Canyon area, was discovered in 2003 and is estimated to hold 120 million barrels of recoverable oil and gas.

Hess’ plan initially calls for three subsea production wells and two water injections wells from two drilling locations that will be tied back to a production facility operated by oil and gas infrastructure company Williams Partners .

The floating production facility, which a capacity of 60,000 barrels oil per day, is expected to be delivered to Hess and Chevron in 30 months, Williams said.

After regulatory approval to assign BP Plc’s interest in the field to Hess, Hess will hold 57.14 percent interest in the field, while Chevron’s interest will be 42.86 percent.

Hess is slated to report third-quarter earnings on Wednesday.

Amid broad market declines, shares of Hess fell 3.6 percent to $58.78, while Chevron was down 1.7 percent at $104.50. Williams shares fell less than 1 percent to $56.89.

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