BP has put to sleep its current development scheme for Mad Dog Phase 2, postponing the billion-barrel deep-water oilfield project in the Gulf of Mexico until a review of options is complete.
The UK supermajor confirmed to Upstream that the multi-billion dollar cost of implementing Mad Dog Phase 2 – based on a giant production spar also referred to as Big Dog – was no longer economic as presently designed.
BP released a statement to Upstream explaining its decision:
“The current development plan for Mad Dog Phase 2 is not as attractive as previously modelled, due largely to market conditions and industry inflation.
“BP, in collaboration with co-owners Union Oil Company of California, a wholly owned subsidiary of Chevron Corp, and BHP Billiton Petroleum, is currently reviewing existing plans and other options in evaluating how to develop the project.
“Mad Dog 2 is a world-class resource. BP fully intends to develop the resources at Mad Dog Phase 2 and is committed to moving forward with the right plan.
“It is too early to speculate when the details of the final plan will be approved by BP and its co-owners.”
The postponement for review means it is all but certain that construction tenders to Technip – which had spent a year on front-end engineering and design for the spar – and the competitive tenders for topsides fabrication will be scrapped for this year.
First steel was originally scheduled to be cut around year-end 2013.
Mad Dog, with recoverable reserves of at least 1 billion barrels, is one BP's four proclaimed giant hubs in the deep-water US Gulf.
If the supermajor's plans for that project can succumb to cost pressures, others of BP's upstream projects in the Gulf – or around the world – could also begin to fall.
The decision follows BHP Billiton Chief Executive Michael Yeager’s comments to Upstream just last month admitting that the cost of both drilling wells and construction of the Phase 2 facility was proving “difficult”.
The spar hull alone – one of the biggest ever planned – had mushroomed in size from 40,000 tonnes to nearly 50,000 tonnes.
Besides oil production, the spar was being designed to support 14 injection wells for a 280,000-bpd waterflood programme for the western and southern portions of the so-called Greater Mad Dog area.
A total 33 subsea wells were planned for tie-back to the spar, according to BP’s last Investor Day presentation by senior vice president global projects Neil Shaw.
BP’s original design capacity had the spar producing up to 130,000 barrels per day of oil and 75 million cubic feet per day of total gas compression.
BP holds a 60.5% working interest in Mad Dog and is the operator. BHP holds 23.9% and Chevron 15.6%.