Houston — After years of pursuing a strategy of mostly tiebacks in the deepwater Gulf of Mexico during the recent industry downturn, BP said it will also now begin adding frontier exploration, a top US executive for the company has said.
After the price of oil dropped by year-end 2014 to roughly half its $100-plus/b value just six months earlier, BP found the most economic pursuit in the US offshore arena was to fill its four large production hubs there with new discoveries made within a 30-mile radius and hook them up to the infrastructure, Starlee Sykes, BP's regional president for the Gulf of Mexico and Canada, said late Wednesday.
"We used to be all about growth, and then particularly after the oil price dropped, it was all about returns "value over volume," Sykes said at the Association of International Petroleum Negotiators' 2019 International Petroleum Summit. "We had a lot of opportunities around our hubs which were really good. To find new stuff wasn't necessary."
But now, BP's strategy is not only to keep full all of its four big hubs originally designed to produce large fields - but to resume the riskier but potentially high-reward treasure hunt for more frontier discoveries, Sykes said.
"Now we'll look at exploration opportunities again," she said.
TIEBACKS STILL VIABLE POTENTIALLY FOR DECADES
Tiebacks around hubs - which Sykes called "making the best use of what you already have" - is a higher priority than exploration, and can continue for many years. Further exploration around its hubs probably has a lifespan of five to 20 more years, she said.
But BP, which sees great value in the US Gulf, also wants to build and grow in the region. And for that, frontier exploration is also needed to invest for the future, Sykes said.
While returns for tiebacks are higher than for a brand-new hub development because no major new infrastructure is needed, "the hubs attract more tiebacks," so both work in tandem, she said.
The company has already started gearing up for more exploration by stretching its Gulf leasing program. While historically it has been one of the top spenders and acreage acquirers in twice-yearly US government Gulf lease sales, it has been notable in recent auctions.
For example, BP was awarded a cache of 20 blocks nearly a year ago in the Eastern Gulf of Mexico, an uncharacteristic operating sphere for the company. Sykes would not elaborate what BP is chasing there, but said the company was "evaluating" the leases and would pick the best prospects and "go forward with [them]."
In addition, BP has advanced deepwater Gulf of Mexico technology in recent years that has saved billions of dollars in efficiencies and prevented waste, added billions of dollars more of value and made even relatively small fields economic, Sykes said.
PROPRIETARY SEISMIC UNEARTHS ADDITIONAL VALUE
Earlier this year, BP trumpeted its proprietary seismic technology earlier this year that allowed it to discover an additional 400 million barrels more oil around its Atlantis Field and another 1 billion new barrels around its giant Thunder Horse complex, both two of the US Gulf's biggest fields.
The company is now amid a Phase 3 expansion at Atlantis, a $1.3 billion project set to come online next year, and recently launched Phase 2 expansion at Thunder Horse South, to be completed in 2021.
But Sykes said the technology has enabled fields of a size, in the past were typically more the province of small independents, to be economic to a company of BP's size. Majors usually chase so-called "elephant" discoveries of 200 million barrels of oil equivalent fields or more, but she said even 5 million-10 million boe may be economic using tools such as Full Waveform Inversion, which allows processing of seismic data in a few weeks that previously would have required a year of analysis.
"Our Manuel discovery last summer changed our view of Na Kika," she said. "We now see more 25 million-50 million [boe] that have the potential to add over $2 billion of value to the asset."
And, BP is participating in two forums that are developing solutions to produce ultra-high pressure/temperature discoveries made years ago which could open up that play in the Gulf, Sykes added.
Currently, about 15,000 pounds per square inch of pressure in Gulf fields is the limit. But the two groups are working on materials and equipment that can withstand the force of 20,000 psi in extremely deep and remote areas of that arena, Sykes said.
"We're really close," she said. "I have zero doubt we'll engineer the solutions."
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