1st Dec 2016 16:31
LONDON (Alliance News) - BP PLC late Thursday said it has sanctioned the USD9.00 billion Mad Dog Phase 2 project in the Gulf of Mexico that is expected to produce up to 140,000 barrels of oil per day from "late 2021".
The project will pump oil from up to 14 production wells and BP and its partners have chosen to push ahead with the project while oil prices are low, which has in turn pushed down the cost of equipment and project development.
BP said progressing the project now means the budget is less than half what was first envisaged.
"This announcement shows that big deepwater projects can still be economic in a low price environment in the US if they are designed in a smart and cost-effective way," said Bob Dudley, BP's chief executive.
BP holds a 60.5% stake in the project and is the operator, while BHP Billiton PLC owns 23.9% and Chevron has a 15.6% interest through affiliate Union Oil Co of California. The partners began to reevaluate the project in 2013 because initial designs were "too complex and too costly".
"Since then, BP has worked with co-owners and contractors to simplify and standardize the platform?s design, reducing the overall project cost by about 60%. Today, the leaner USD9.00 billion project, which also includes capacity for water injection, is projected to be profitable at or below current oil prices," said Dudley.
Importantly, BP said that, although it has given the green light to the development, Chevron and BHP have not yet formally confirmed their consent, but said they are both expected to shortly.
BP shares were up 2.4% to 470.35 pence per share on Thursday while BHP shares were up 1.5% to 1,333.50 pence.
By Joshua Warner; [email protected]; @JoshAlliance
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