BP Plc (NYSE: BP) has started production at its deepwater Thunder Horse Northwest Expansion project in the U.S. Gulf of Mexico (GoM), marking the fourth major project startup for the British major this year.
The expansion project, which the company said was completed four months early and 15% under budget, is expected to increase production at the Thunder Horse Field by about 30,000 barrels of oil equivalent per day (boe/d) to reach more than 200,000 boe/d.
The tieback project involved adding a new subsea manifold and connecting two wells to existing flowlines about 3 km (2 miles) north of the Thunder Horse platform. The project marks the third major project in the last three years at the field. BP said a major water injection project was completed in 2016 to enhance oil production, and another expansion project last year boosted gross production at the field by more than 50,000 boe/d.
“This latest expansion of Thunder Horse is another important milestone in our efforts to maximize value from our assets in the Gulf,” Starlee Sykes, regional president of BP’s Gulf of Mexico and Canada business, said in a news release. “Over the past five years, we’ve driven up production through safe and reliable operations and bringing on new deepwater projects in a more efficient and standardized way. All this hard work is now delivering results. Our Gulf of Mexico business is thriving.”
The production startup took place as the offshore oil industry continues to rebound from the aftermath of the recent market downturn. Offshore producers are also having to compete with onshore unconventional developments for investment dollars.
But the outlook for production in the GoM production, where tiebacks to existing infrastructure are bringing costs down, appears bright. The U.S. Energy Information Administration (EIA) forecasts production to jump to an average 1.7 million barrels per day (MMbbl/d) in 2018 and to 1.8 MMbbl/d next year.
“However, uncertainties in oil markets may still affect long-term planning and operations in the GOM, and the timelines of future projects may change accordingly,” the EIA cautioned.
The GoM remains part of BP’s upstream strategy.
“Leveraging our world-class position and facilities, we are bringing new barrels online rapidly and efficiently, and uncovering more opportunities nearby,” Bernard Looney, BP’s upstream chief executive, said in the release. “We are focused on growing value and these projects in the Gulf are competitive with any opportunities we have worldwide. This is what we mean by growing advantaged oil.”
Others are also seeing proven potential in the GoM.
This year the industry saw Kosmos Energy Ltd. (NYSE: KOS), an Atlantic Margin-focused E&P, enter the GoM with its acquisition of deepwater player Deep Gulf Energy for about $1.23 billion in cash and stock; Fieldwood Energy LLC emerge from bankruptcy and buy Noble Energy Inc.’s (NYSE: NBL) GoM assets for $480 million cash; and Cox Oil Offshore LLC snap up Energy XXI Gulf Coast Inc. (NASDAQ: EGC) for $322 million.
But just as new players have joined the likes of BP, others are said to be considering selling GoM assets as shift focus elsewhere.
Royal Dutch Shell Plc (NYSE: RDS.A) was reportedly in talks to sell its assets in the GoM to help pay for its BG Group acquisition, according to a Bloomberg report. The company has interest in the Caesar Tonga Field.
Earlier this month, Reuters reported Exxon Mobil Corp. (NYSE: XOM) was exploring the sale of some of its deepwater GoM assets. The company, which has stakes in the Julia, Hadrian South, Heidelberg and Lucius fields, has already reportedly sold nearly 30 leases or stakes in leases to other companies in the last four years.
Exxon Mobil holds a 25% working interest in Thunder Horse.
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The March 20 lease sale in the U.S. Gulf of Mexico brought in $244.3 million in high bids.
The country aims to manage its burgeoning oil sector responsibly, while attracting further investment and funding needed for infrastructure projects and services.
The Dallas-based oil and gas company is bullish on conventional production and believes that is what is needed to develop significant resources internationally.