Oil major BP has approved a hefty investment in a project in the Gulf of Mexico. The move came as oil prices rallied in the wake of a decision by OPEC nations to cut production starting in January.
Oil prices are gaining after OPEC made it clear it would cut its output as of January. Officials at oil giant BP appear confident that prices will recover further in the months and years ahead.
The company announced it had approved a $9-billion (8.4-billion-euro) 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 showed confidence that the company could safely operate in the region. At the same time, it reflected a bet that oil produced in deepwater offshore regions could compete with rival on-shore production.
"This announcement shows that big deepwater projects can still be economic in a low-price environment in the US, if they're designed in a smart and cost-effective way," CEO Bob Dudley said in a statement.
Change in assessment
So far, 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.
"Around two years ago, people didn't think there was an economic level to sanction anything in deep water, so [BP's decision] seems like a bullish indicator for the market," said Sanford Bernstein analyst Mark Tabrett.
The Mad Dog Phase 2 project is to start producing oil in late 2021 and will have the capacity to pump up to 140,000 barrels per day from up to 14 wells.
hg/sgb (dpa, AP)