BP bets on offshore in Gulf of Mexico
USA
HOUSTON, June 27, 2017 – While others bet on shale, BP seeks to capitalise on its existing infrastructure and on low service fees to expand its exploration and development in the Gulf of Mexico, international media reported on Tuesday.
On May 1, the company announced that it had discovered an additional 1 billion boe at its four Gulf of Mexico developments.
A series of innovations, broadly comparable to those that have slashed the costs of shale producers, are helping the company target profit in this high-cost environment during a period of low oil prices, Reuters reported.
Those include “tieback” extensions to tap more remote parts of fields where in the past reserves would have been left in place, the report added.
While others including Anadarko have recently claimed that it would be hard to eke out a profit in the Gulf with oil prices at less than USD 60 per barrel, BP insists that such tweaks will make its next development, the Mad Dog 2 project, profitable even at USD 40 per barrel. They have already helped bring down the cost of the expansion of Mad Dog, one of the four Gulf platforms it operates, from USD 20 billion to USD 9 billion.
“Our strategy is to take this investment that we spent so much money building, and keep it full,” Richard Morrison, regional president of BP for the Gulf of Mexico, told Reuters.
“It seems like every ten years there’s another [big discovery in the Gulf],” he added.
While BP continues to pay about USD 61 billion of costs and damages for the 2010 Deepwater Horizon spill in the Gulf of Mexico, the industry’s worst such accident to date, it also claims it has significantly upgraded its safety standards, including by hiring some 800 safety and operational risk staff and standardising drilling practices.
Industry insiders say the firm can also capitalise on low prices in the oil services market, where businesses have struggled to stay afloat in the wake of the slump in oil prices.
“If you’re going to be building an offshore Gulf of Mexico platform, now is the time to be doing it,” Norm MacDonald, portfolio manager for Invesco’s energy fund, a BP investor, told Reuters.
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