BP is hard at work in the Gulf of Mexico, launching a third phase to a legacy project off the coast of New Orleans. Outside of the production phase, it's working just as hard to revamp its image. Four years and a $4 billion promise later, is it time to move on?
BP said production started from Phase 3 of the Na Kika project, situated about 140 miles off the coast of New Orleans in the deep waters of the Gulf of Mexico. With a total production capacity of 130,000 barrels of oil equivalent per day, BP's regional President Richard Morisson said Na Kika was a testament to the importance of the region.
"The Na Kika Phase 3 project demonstrates BP’s ongoing commitment to the deepwater Gulf of Mexico and highlights our portfolio's ability to unlock value for investors while also delivering vital energy resources to the United States," he said.
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Production from Na Kika first began in 2003, seven years before the Deepwater Horizon tragedy soiled the region along with BP's reputation. Nearly four years after the incident and the company says it's not only the largest investor in the region, but the leading acreage holder as well.
It can't bid on new acreage, however, because of a 2012 ban imposed by the U.S. federal government after the company pleaded guilty to criminal charges stemming from the disaster. The U.S. Environmental Protection Agency said BP lacked "integrity," prompting the British oil giant to sue. The Justice Department, however, said BP has yet to show it was a "responsible" potential contractor, and ruled to keep the company out of new bids. BP America CEO John Minge said, however, "we're getting closer" to having that ban reversed.
Two lease sales in the Gulf of Mexico scheduled for March could unlock 1.7 billion new barrels of oil and 4.1 trillion cubic of gas for explorers. The first three leases outlined under the terms of a five-year lease plan brought in $1.4 billion in high bids for the government.
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Last week, the company said the environmental damage to the gulf ecosystem might be "far less" than originally feared. It remains, however, the whipping boy for advocates wary of offshore development and still could face $18 billion in penalties for violating the Clean Water Act. Some of the claims already paid out are frivolous, the company said in an anti-scapegoat offensive, and have "no apparent connection to the spill."
BP's dismal fourth quarter earnings showed remnants of the Gulf of Mexico disaster, though its performance was buoyed partially by its stake in Russian operations. Lip service aside, the company said it wants to invest $4 billion a year in oil and gas development in the Gulf of Mexico over the next 10 years. If there's any sincerity to rhetoric behind the North American energy narrative, a strong future may have to include BP.
By Daniel J. Graeber of Oilprice.com