BHP to spend $2.9bn on Mad Dog

BHP Billiton has signed off on a $2.9 billion investment for its share of the Louisiana oil field.

BHP has been shifting its investment focus to the petroleum sector, betting oil-and-gas markets will improve more quickly than other commodities such as iron ore. Picture: Aaron Francis/The Australian.

BHP Billiton said its board had signed off on a $US2.2 billion ($2.89bn) investment for its share of a major deep-water project in the Gulf of Mexico led by BP.

UK oil major BP in December announced plans to press ahead with a project to expand production from the Mad Dog oil field, located off the coast of Louisiana, which it operates and in which it holds a 60.5 per cent interest.

On Thursday, Anglo-Australian mining company BHP Billiton, which has a 23.9 per cent stake in the field, said its board has approved spending for its portion of the Mad Dog Phase 2 project.

The remaining 15.6 per cent interest in the field is held by Chevron unit Union Oil of California.

BHP has been shifting its investment focus to the petroleum sector, betting oil-and-gas markets will improve more quickly than other commodities such as iron ore. It forecasts that demand growth and natural field decline will support a recovery in oil prices in coming years.

The advancement of the major project, estimated to have a total cost of $US9bn ($11.81bn), is the latest evidence oil companies are tentatively wading back into big-ticket projects following a downturn in global energy markets.

“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 deep-water basins,” said Steve Pastor, BHP’s president of petroleum operations. “It offers an attractive investment opportunity for BHP Billiton and aligns with our strategic objective to build our conventional portfolio,” he said.

The second phase of Mad Dog, which is expected to begin production in late 2021, would add the capacity to pump an extra 140,000 barrels a day to a project currently producing about 80,000 barrels a day of oil and about 60 million gross cubic feet of natural gas. The project involves installing a floating production facility about 6 miles from the existing platform.

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