BP has opted for a slimmed down Spar production platform for its Mad Dog Phase 2 development, having stalled the project earlier this year due to spiralling forecast costs.
The company has laid the blame for the rethink on its socalled ‘Big Dog’ spar squarely on the offshore industry’s soaring cost inflation levels, and put the spar on a weight-loss program with the help of its project contractors.
BP’s CEO, Bob Dudley, admitted in the major’s latest results presentation that the company is seeing sector inflation of around 5% per year for both Capex and Opex. As in the case of the also-rethought Browse mega-project offshore Australia, Dudley said that what the company had done “is I think what you would expect us to do as we refine capital cost and project designs. If they don’t fit, we’ll take a step back rather than committing and then going down the road, as they say in the U.S., on the road to Abilene with some big projects. So I think this is exactly what you’d like to see us do”.
The company’s head of upstream business, Lamar McKay, added that for Mad Dog it had wanted to “make sure that the projects have the best economics that they can, and we’ve taken a decision to rethink and reshape that a bit with both our partners and our contractors”.
Potential savings and efficiencies, he continued, would come in two ways. One was by moving to a “slimmer kind of repeatable spar design that’s been built before” rather than a brand new design that it had been looking at. He also said that BP would “back off the size just a tad probably to, in effect, get 90% of the benefit with maybe quite a bit less of that cost”.
McKay also pointed out that Mad Dog Phase 2 had been reshaped in “good conversations” with both contractors and partners. The FEED work on Mad Dog Phase 2 was carried out by Amec (topsides), Technip (for the spar) and FMC for the subsea infrastructure.
Mad Dog Phase 1 was of course developed by a smaller 100,000 b/d oil, 60 MMcf/d gas spar facility, built by Technip at Pori in Finland, and the slimmed down Phase 2 Spar may now end up being much closer to the original, DI hears.
BP first revealed three months ago (see DI, 6 May 2013, page 1) that it had changed its mind on the development plans because of the spiralling forecast costs for the giant newbuild truss spar facility, delaying the start of work on the floating production facility and subsea infrastructure. DI was told that the forecast total costs emerging from work in the FEED (Front End Engineering and Design) stage were close on double the originally estimated figures at around $18 billion.
BP’s partners in Mad Dog are BHP Billiton and Chevron. The development in its original form would have been BP’s largest greenfield project in the US Gulf for a decade, and one of the world’s largest ever spars. The ‘Big Dog’ spar had a planned production capacity of 130,000 b/d of oil, 75 MMcf/d of total compression, and a water injection capacity of 280,000 b/d for waterflood of the western and southern field segments. The water injection capacity was also designed to be expandable to 350,000 b/d to accommodate future injection requirements.
The infrastructure for the stalled plan also included 33 wells – 19 producer wells and 14 injection wells.
BP operates Mad Dog Phase 2 with a 60.5% stake, with BHP holding 23.9% and Chevron 15.6%.A Final Investment Decision 2 could still be taken by the end of this year, DI hears. Construction of the spar at Technip’s Pori facility is likely to kick off early in 2014.
Mad Dog lies in Green Canyon Block 782 in water depths ranging from 1,372-2,073 m (4,500-6,800 ft). Recoverable reserves are put at up to 450 MM boe, although this is believed to be considerably conservative. First oil was originally penciled in for 2018.
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