BP to Proceed with Deep Water Project in Gulf of Mexico -- Update
December 01 2016 - 1:29PM
Dow Jones News
By Sarah Kent
LONDON -- BP PLC plans to press ahead with a major deep water
project in the Gulf of Mexico -- the latest evidence oil companies
are tentatively wading back into big-ticket projects amid signs a
two-year crude-market slump is ending.
The project to expand production from the Mad Dog oil field off
the coast of Louisiana has faced years of delays. BP and its
partners struggled to bring down costs, contending first with high
industry inflation in the boom years before 2014, and then with a
catastrophic slump in oil prices.
The oil giant said it had reduced the cost of Mad Dog phase 2 --
as the project is known -- to $9 billion, compared with $20 billion
in 2013. Oil companies such as Royal Dutch Shell PLC have said
recently they have successfully cut back to make even historically
expensive deep water projects work at lower oil prices.
"Some people say that deep water is finished," BP's head of
exploration and production Bernard Looney said in a presentation
this summer. "We have a very different view."
The decision to move ahead with Mad Dog phase 2 came a day after
the Organization of the Petroleum Exporting Countries said its
members would curb oil output. Crude prices have soared over 14%
since the deal, with Brent crude, the international benchmark,
hitting $54.50 in London trading Thursday afternoon.
The OPEC deal has added fresh confidence to an industry that has
tentatively begun to invest again, signaling a gradual recovery
after companies slashed their budgets in response to low oil
prices.
Oil companies had cut $1 trillion from their planned global
spending on exploration and production for the period between 2015
and 2020 in response to the price slump, according to a June report
by Edinburgh-based consultancy Wood Mackenzie.
The project also comes as BP embarks on a plan to raise its
production of oil and gas by 800,000 barrels of oil equivalent a
day over the next four years.
The second phase of Mad Dog would add the capacity to pump an
extra 140,000 barrels a day to a project currently producing about
80,000 barrels a day of oil and about 60 million gross cubic feet
of natural gas. The project involves installing a floating
production facility about six miles from the existing platform.
The project is expected to begin production in late 2021, but it
still needs approval from BP's partners, BHP Billiton Ltd. and
Chevron Corp. unit Union Oil Company of California.
Chevron spokeswoman Brenda Cosola said the company is reviewing
the plans for the project and will announce its decision "at an
appropriate time." BHP Billiton declined to comment.
Bradley Olson in Houston contributed to this article.
Write to Sarah Kent at sarah.kent@wsj.com
(END) Dow Jones Newswires
December 01, 2016 14:14 ET (19:14 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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