BP: Final Investment Decision ‘imminent’ for Mad Dog 2 offshore project

After years of delays, British oil company BP is set to sanction a multi-billion dollar deepwater Gulf of Mexico project – the Mad Dog 2.

The Mad Dog 2 is an extension to the Mad Dog project in the U.S. Gulf of Mexico which has been in production since 2005 via a spar facility designed to process 80.000 barrels a day. Located offshore Louisiana, the Mad Dog field is one of BP’s largest discoveries in the area.

As the company in 2009 discovered more oil at the southern part field, it has decided to press ahead and chuck in another production facility nearby – via a project named Mad Dog Phase 2.

BP had a few years ago planned for the Mad Dog Phase 2 costs at $20 billion with a larger truss spar selected as the development concept. The company had calculated that the project would be economic at prices around $100 a barrel. The FID had been expected in 2013, with first oil in 2018.

Taking another look

However, BP and its partners Chevron and BHP Billiton then decided to take another look at those projections, and selected standardized systems instead of originally chosen bespoke solutions, slashing the expected project costs by half to around $10 billion.

The new development solution entails a wet tree subsea development supported by a floating semi-submersible production and water injection facility.

While BHP Billiton in October said the project sanction could be expected in “the next six months,” during a conference call presenting the third quarter 2016 results last week, BP revealed that the Final Investment Decision for the large Gulf of Mexico project was “imminent.”

Responding to an analyst during the call Brian Gilvary BP’s Chief Financial Officer said the Mad Dog FID was “coming up in fourth quarter” 2016 and was “sort of imminent.”

He also revealed that the project would come below $10 billion previously expected.

While Gilvary did not say anything on the expected first oil, BHP Billiton in its October presentation that, subject to the approval of the project, drilling could begin in 2018, with first oil expected in 2022.

Also, BHP Billiton said Mad Dog 2 was “now economically attractive even well below $50 a barrel.”

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