By Kristen Hays

HOUSTON (Reuters) - BP Plc (LSE:BP.) has begun appraisal drilling in its highly touted Tiber oil prospect in the Gulf of Mexico, the company said on Thursday, more than three years after its massive Macondo blowout and crude spill set back drilling in the basin.

BP confirmed that drilling began on August 3. ConocoPhillips (COP) Chief Executive Ryan Lance disclosed it to analysts during a webcast presentation at the Barclays Energy-Power Conference in New York. ConocoPhillips is a minority partner in Tiber.

"We are appraising the Tiber discovery which was made pre-incident in the Gulf of Mexico," Lance said, referring to BP's 2010 Macondo oil spill that spewed millions of barrels of crude into the Gulf and prompted a six-month drilling shutdown by the U.S. government.

In 2009, BP touted what it called a "giant" oil discovery in the Tiber field next to its Kaskida field that could hold up to 3 billion barrels of oil.

Both fields are in the Lower Tertiary trend, the Gulf's deepest, most challenging and most promising deposit that is estimated to hold up to 15 billion barrels of oil.

BP had planned in 2010 to drill appraisal wells in the Tiber field to help gauge how much oil was there. The company's Macondo rupture and spill prompted the shutdown that delayed those plans as well as drilling by other Gulf oil producers.

That drilling plan resumed last month with the start of the new well in Tiber. BP had already begun exploratory drilling at another prospect near Tiber, called Gila, and that work is continuing.

BP owns the most leases in the Gulf and holding them gives producers the right to drill. The company also is the second-largest oil producer in the basin, behind Royal Dutch Shell (RDSa.L).

BP's biggest new oil project in the Gulf, the Mad Dog Phase 2 development of its Mad Dog field, remains under review because of rising costs from industry inflation, spokesman Brett Clanton said on Thursday.

Rising costs had made the 2013 plan for Mad Dog Phase 2 less attractive than previously planned. BP calls Mad Dog 2 a "mega project," meaning it requires a gross investment of more than $10 billion.

BP already operates an oil and gas platform at its original Mad Dog development that can produce up to 80,000 barrels per day of oil and 60 million cubic feet per day of natural gas.

(Editing by Terry Wade, Bob Burgdorfer and Ken Wills)