BHP Billiton said on Thursday that it had approved spending US$2.2 billion of its share of development of BP-operated Mad Dog Phase 2 deepwater project in the Gulf of Mexico, which would mark the UK oil supermajor's first new project in the area since the Deepwater Horizon disaster.
BHP Billiton holds a 23.9-percent participating interest in the Mad Dog field. The operator BP owns a 60.5-percent participating interest, and an affiliate of Chevron U.S.A. Inc. - Union Oil Company of California - holds the other 15.6 percent participating interest in the project.
In December last year, BP sanctioned the US$9-billion project, which will include a new floating production platform with the capacity to produce up to 140,000 gross barrels of crude oil per day from up to 14 production wells. Oil production is expected to begin in late 2021.
BP has been re-evaluating the project since 2013 after an initial design turned out to be too complex and expensive. BP, the co-owners and contractors have reduced the overall project cost by around 60 percent, to US$9 billion.
BP's investment decision late last year and BHP Billiton's joining in today with an investment pledge show that deepwater is not doomed.
At an industry event in October last year, BP's CEO Bob Dudley was more optimistic about deepwater drilling than his colleagues' oil executives.
Related: Permian Drilling Costs Surge: Are The Days Of Cheap Oilfield Services Over?
In BP's statement on sanctioning Mad Dog 2, Dudley said:
"This announcement shows that big deepwater projects can still be economic in a low price environment in the U.S. if they are designed in a smart and cost-effective way."
Steve Pastor, BHP Billiton President Operations Petroleum, said today that the project is part of his group's strategic objective to build a conventional portfolio through the development of large, long-life, high-quality resources.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More