The British Petroleum (BP) has intensified efforts on deep-sea drilling of crude at its platforms in the Gulf of Mexico that could produce more oil in a day than a West Texas rig can pump in a year, according to reports by Reuters.
In one of its four Gulf of Mexico platforms, which BP has staked its future in U.S oil production, the company is expected to drill extract
up to 265,000 barrels per day.
BP’s deepwater double-down is all the more striking for the contrast to its chief competitors, who have cooled on offshore investments in light of the lower costs and quicker returns of onshore shale plays.
This is coming at a time analysts have described ‘disaster’s wake’ as crude stockpiles are rising and prices tumbling in international oil
markets. For Organisation of Petroleum Exporting Countries (OPEC), this is bad news as the cartel has made efforts to buoy oil prices with cuts, which are yet to have reasonable effects on prices.
Oil prices dropped steeply last week, settling in the low $40s per barrel.
BP says its next Gulf development – the $9 billion Mad Dog phase two – would be profitable even at $40 a barrel. As recently as 2013, BP reported that it could not start new deepwater Gulf projects at prices lower than $100 a barrel.
Seven years after its Deepwater Horizon explosion and oil spill, BP is betting tens of billions of dollars on the prospect that it can slash
the costs of offshore drilling by half or more – just as shale oil producers have done onshore.
The firm says it can do that while it continues to pay an estimated $61 billion in total costs and damages from the worst spill in history – and without compromising safety.
BP’s Gulf platforms are key to a global strategy calling for up to $17 billion in annual investments through 2021 to increase production by
about 5 percent each year, Chief Executive Officer Bob Dudley recently told investors.
“Our strategy is to take this investment that we spent so much money building, and keep it full” to the platform’s capacity, Richard Morrison, BP’s regional president for the Gulf of Mexico, told Reuters during the first tour of a BP Gulf drilling platform since the disaster. “We’re also exploring for larger pools of oil.”
While BP has some onshore U.S. developments, the firm is notably absent from the industry’s rush into shale oil fields of the West Texas Permian Basin.
Majors including Exxon Mobil Corp (XOM.N), Chevron Corp (CVX.N) and Royal Dutch Shell (RDSa.L) have maintained Gulf operations but focused expansions on U.S. shale. Exxon Mobil doubled its acreage in the Permian in a deal earlier this year.
Freeport-McMoRan (FCX.N) and Devon Energy Corp (DVN.N) have pulled out of Gulf drilling entirely in recent years. Anadarko Petroleum Corp (APC.N) took a $435-million dollar write-down in May on its Shenandoah project in the Gulf, deciding it could not profit with oil prices
hovering at about $50 a barrel.
“In a $50 to $60 world, we always felt like greenfield development, in the Gulf in particular, was fairly challenged,” Anadarko CEO Al Walker told investors last month.
BP announced last month that it had discovered an additional billion barrels of oil below its four audaciously named Gulf platforms – Thunder Horse, Atlantis, Na Kika and Mad Dog.
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The find – worth more than $40 billion at today’s market prices – amounts to more than three times the proven reserves at the Na Kika field, or the equivalent of three new fields in the Gulf.
“It seems like every ten years there’s another breakthrough” that unlocks more Gulf oil, Morrison said on the deck of Thunder Horse.
Over his shoulder, a drillship three miles away tapped a new well that will feed production into the massive platform.
BP’s big new discovery is key to its slashing of estimated per-barrel costs, as are a host of drilling innovations and more favorable deals
with service providers.