BP delays $10 billion Gulf of Mexico project due to rising costs
BP's largest new oil project in the Gulf, called Mad Dog Phase 2, sits atop a 4 billion barrel oil field. BP blames 'market conditions and industry inflation' for delay.
The Mad Dog 2 development was set to become BP’s largest new oil project in the Gulf of Mexico for over a decade. Construction was expected to begin this year with the first oil pumped before 2020, but the rising costs have now made this plan difficult to justify, and the company has had to return to the drawing board to come up with a new plan, which will most likely involve a delay of a year or so.
The oil field at Mad Dog 2 is estimated to contain four billion barrels of oil equivalent. The project will see a second platform constructed on the field, linked to 33 new subsea wells which will extract the oil. (Related article: Finding Good Investments in Areas with Growing Oil Production.)
BP released a statement to explain that “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 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.”
Increasing costs have also led other companies to abandon projects in the energy sector. Woodside Petroleum has had to rethink initial plans to build a $45 billion liquefied natural gas plant in Western Australia due to large cost over-runs. And France’s Total has had to abandon a multibillion dollar oil sands project in Canada after the venture became economically unviable.
The Christian Science Monitor has assembled a diverse group of the best energy bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link in the blog description box above.