BHP Billiton has approved expenditure of $2.2 billion for its share of the development of the Mad Dog Phase 2 project in the Gulf of Mexico.
Mad Dog Phase 2, located in the Green Canyon area in the Deepwater Gulf of Mexico, is a southern and southwestern extension of the existing Mad Dog field. The project includes a new floating production facility with the capacity to produce up to 140,000 gross barrels of crude oil per day from up to 14 production wells. Production is expected to begin in the 2022 financial year.
BHP Billiton holds a 23.9 percent participating interest in the Mad Dog field. BP, the operator, holds a 60.5 percent participating interest, and Union Oil Company of California, an affiliate of Chevron U.S.A., holds the remaining 15.6 percent participating interest.
BP sanctioned the Mad Dog Phase 2 project late last year after deciding to re-evaluate the project after an initial design proved too complex and costly. Since then, BP has worked with co-owners and contractors to simplify and standardize the platform’s design, reducing the overall project cost by about 60 percent. Today, the leaner $9 billion project, which also includes capacity for water injection, is projected to be profitable at or below current oil prices.
BP discovered the Mad Dog field in 1998 and began production there with its first platform in 2005. Continued appraisal drilling in the field during 2009 and 2011 doubled the resource estimate of the Mad Dog field to more than four billion barrels of oil equivalent, spurring the need for another platform at the field.
The second Mad Dog platform will be moored approximately six miles to the southwest of the existing Mad Dog platform, which is located in 4,500 feet of water about 190 miles south of New Orleans. The current Mad Dog platform has the capacity to produce up to 80,000 gross barrels of oil and 60 million gross cubic feet of natural gas per day.
Steve Pastor, BHP Billiton President Operations Petroleum, said “Mad Dog Phase 2 is one of the largest, discovered and undeveloped resources in the Gulf of Mexico, one of BHP Billiton’s preferred conventional deepwater basins. It offers an attractive investment opportunity for BHP Billiton and aligns with our strategic objective to build our conventional portfolio through the development of large, long-life, high-quality resources.”