HOUSTON -- Talk about timing. Tuesday

Conoco

(COC)

announced an oil discovery in the deep waters of the Gulf of Mexico. The well was the first drilled by the

Deepwater Pathfinder

, a new rig jointly built and owned by Conoco and

R&B Falcon

(FLC) - Get Report

.

Construction of the new rig was the topic of a luncheon address at the

Offshore Technology Conference

here on Wednesday. Farhad Rajabi, a Conoco vice president, discussed how a major oil company and a drilling company joined forces to build a rig on time and within budget that's capable of drilling in 10,000 feet of water.

At a cost of $265 million, the Deepwater Pathfinder was no small undertaking. Along with its sister ships,

Deepwater Frontier

and

Deepwater Millenium

, Deepwater Pathfinder stands out as a success story for R&B Falcon, which last year was plagued by cost overruns and delays with its

Peregrine VII

drill ship project. The Pathfinder and its sisters also stand out for their ownership structure. It's rare for a drilling contractor and an oil company to actually share ownership.

But Conoco, which has amassed 295 Gulf of Mexico leases over the past several years, 265 in deep water, saw a lack of drilling equipment for the water depths it was considering.

"In order to meet our business objectives and have our drilling schedule under control, we concluded the best thing would be to build a drill ship of our own," Rajabi said. As far as the choice of contractor, R&B Falcon shared the same vision for a deep-water ship, Rajabi said, and its skills in drilling management were complimentary to Conoco's skills in rig design and marine services. A limited liability company was formed to own and operate each ship. Conoco and R&B share ownership of the Pathfinder equally.

Samsung Heavy Industries

won the contract to build the rigs, but not before a team of 50 engineers worked with the Conoco-R&B team for three months hammering out the rig's specifications. The result is a vessel over 30 stories high, 726 feet long and 138 feet wide. "You can probably play baseball on

the bridge if you decide to do so," Rajabi said.

Look for oil service companies to play even larger roles in exploration projects thanks to mergers, cost cutting and expanded opportunities, said Robin West, chairman of Washington, D.C.-based

Petroleum Finance

.

In a session devoted to the energy industry in the next millennium, West said he sees the major oil companies managing the financial, commercial and political risks involved in global exploration, while the service companies will take on more technical and operating risks.

Another big change is the advent of international investment in producing areas formerly controlled by national oil companies such as

Saudi Aramco

and

Petrobras

.

Meanwhile, West took aim at the most popular "strategy" in the industry today, cost cutting. "We would argue that cost-cutting is not strategy," he said.

Tony Hayward, group vice president of

BP Amoco

,

(BPA)

, begged to differ. "We are faced with a hydrocarbon business that is truly becoming an economics business," he said. "Looking at the industry, what I would say is we should be looking at a world where there truly is more supply than demand, and cost-management truly is important."

Hayward also offered his own thoughts on the industry's future, including cooperation that today seems impossible. For instance, what if environmental groups such as

Greenpeace

and the

U. S. Environmental Defense Fund

were invited to set up shop at the conference? "These groups

should be talking about how we can do business together going forward," he said.