FILE PHOTO: A BP logo is seen at a petrol station in London, Britain January 15, 2015. REUTERS/Luke MacGregor/File Photo
May 6, 2019
By Jessica Resnick-Ault
NEW YORK (Reuters) – BP Plc on Monday announced new production units in the Gulf of Mexico, enhancing its standing as the largest producer there at a time when rival global oil majors are scrambling to expand vast U.S. onshore shale drilling.
Britain-based BP will add two new subsea production units about two miles (3.2 km) south of its existing giant Thunder Horse platform, with two wells added in the near term and eight total wells planned, the company said on Monday. BP did not disclose the cost of the investment.
The investment runs against current industry trends that emphasize spending on shale, which has propelled U.S. production to more than 12 million barrels a day (bpd), making it the largest producer in the world. U.S. offshore production accounts for 1.8 million bpd, but has grown more slowly.
Like its rivals, BP has completed a massive onshore acquisition, buying BHP Billiton’s onshore assets for $10.5 billion to improve its shale position. That new investment has not detracted from the company’s plans for the Gulf.
People familiar with BP’s investment decisions told Reuters that the Gulf’s vast oil reservoirs and increasingly affordable platforms make the formation a good hedge against the risks of shale, where industry’s per-well productivity has dropped by 14 percent from its 2016 high. Among deepwater basins, the Gulf of Mexico’s reliable regulatory climate makes the region particularly attractive, analysts say.
BP said it plans to increase its Gulf production to about 400,000 barrels of oil equivalent per day (boed) by the mid 2020s. That’s about a fifth of the region’s total production. The company’s Gulf production has already increased more than 60 percent from 2013 to more than 300,000 boed.
“Those big fields keep on giving,” Starlee Sykes, the company’s president for operations in the region, told Reuters.
NEW SEISMIC IMAGING CAPABILITY
The new development at Thunder Horse will add 50,000 gross boed of production, with first oil expected in 2021. That’s more crude from a single project than the total Permian production BP acquired as part of the deal with BHP Billiton.
BP used new seismic imaging capabilities to identify an additional 1 billion barrels of oil in place at the Thunder Horse field.
“One of the significant advantages of deepwater or offshore wells relative to onshore U.S. wells is their high productivity,” said Emeka Emembolu, BP’s Gulf of Mexico vice president for reservoir development. “On average, Deepwater Gulf of Mexico wells produce around 5,000 barrels of oil per day.”
Some offshore wells have production rates starting at 30,000 barrels per day, he said. That’s compared with an average of just 650 barrels a day for Permian wells, according to U.S. Energy Department statistics.
Offshore developments traditionally require hefty upfront investment, but improved recovery technologies have reduced project costs. BP has reduced its per-barrel costs to $40 a barrel or less – on par with wells in the best shale formations.
“Growth in onshore oil can only provide 15-20% of what the market needs year-on-year in terms of volume growth, so that’s why you see continued activity in the Gulf of Mexico, in offshore Brazil, and new basins popping up,” said Andrew Slaughter, executive director, Deloitte Center for Energy Solutions.
Still, in the United States shale has overshadowed the Gulf. Chevron Corp and Occidental Petroleum Corp are locked in a battle for Anadarko Petroleum Corp, with both touting onshore and liquefied natural gas assets as key attractions of the deal, rather than Anadarko’s Gulf platforms. Anadarko produces roughly 140,000 bpd from the Gulf.
Separately, Exxon Mobil Corp has started a sale process to identify a buyer for 45,000 bpd of Gulf production interests and Royal Dutch Shell agreed to sell a production platform last month.
BP has maintained a position in each of the five largest Gulf fields, and it also is one of the few of late bidding on areas not adjacent to existing properties in the Gulf.
The rest – mostly the majors and a few niche regionally-focused independent companies – have centered their exploration around acreage next to existing platforms.
(Reporting By Jessica Resnick-Ault; Editing by Bill Berkrot)