Oil major BP has approved a $9bn (€8.5bn) investment in its ‘Mad Dog’ project in the Gulf of Mexico, its first major new platform in the region since a 2010 explosion at its Macondo well led to the worst offshore disaster in US history.
The decision shows confidence that the company can safely operate in the region and is a bet that oil produced in the deepwater offshore can compete with rival on-shore production.
The project’s costs have declined from over $20bn initially, to less than half that amount, BP said.
“This announcement shows that big deepwater projects can still be economic in a low price environment in the US if they are designed in a smart and cost-effective way,” said Bob Dudley, BP’s chief executive.
The platform is the first BP-operated project that the company has sanctioned in the Gulf of Mexico since the April 2010 spill at its Macondo well, the worst offshore oil disaster in US history.
The project comes as a two-year crude price rout has curbed interest in offshore development.
“Offshore has lagged what we’ve seen onshore in unconventional oil,” said Jim Krane, an energy fellow at Rice University in Houston, Texas.
Companies have been reluctant to invest in costly large offshore developments as oil produced from shale formations in the US has become more economical and created a supply glut.
The project will start producing oil in late 2021.
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