BP is moving forward with the US-based Mad Dog oil project, which includes BHP Billiton as a key partner, at a considerably lower development cost.
The cost of the now US$9 billion ($12.1 billion) phase two project was originally estimated to be around US$20 billion. However, BP said it had worked with its partners and contractors to standardise the platform’s design, leading to a cost reduction of about 60 per cent.
According to BP, phase two of the deepwater project in the Gulf of Mexico will include a new floating production platform with the capacity to produce 140,000 barrels of oil a day from up to 14 production wells. Oil production is expected to begin in late 2021.
BP chief executive Bob Dudley said the company’s commitment to Mad Dog showed that big deepwater projects could still be economic in a low-price environment in the US if they were designed in a smart and cost-effective way.
“It also demonstrates the resilience of our strategy which is focused on building on incumbent positions in the world’s most prolific hydrocarbon basins while relentlessly focusing on value over volume,” Dudley said.
While BP has reached a final investment decision, its project partners, including BHP Billiton and Chevron, are yet to make the same commitment.
BP is the majority owner of Mad Dog with a 60.5 per cent interest, while BHP Billiton has a 23.9 per cent share in the project. BP discovered Mad Dog in 1998 and started producing from its first platform in 2005.