The highly anticipated Phase 2 of BP’s Mad Dog project in the U.S. Gulf of Mexico’s Green Canyon area could be among the projects sanctioned within the next 18 months.

During its latest earnings call, BP executives said costs for the project have fallen as the company continues to simplify some of the engineering, further improving the economics.

BP has said that costs for the development are now less than half of the $20 billion originally estimated a few years ago.

“We are making sure the breakeven cost or the cost that allows us to receive a reasonable return on our capital is coming down, down, down,” BP CEO Bob Dudley said, according to a Seeking Alpha transcript of the call. “Mad Dog will be under $40 per barrel by the time we’re done on that, for example.”

The Phase 2 subsea development will be tied back to a new floating production hub, which will have up to 24 wells from four drill centers, according to BP.

Currently, the Mad Dog Field is producing from a truss spar, designed to process 80,000 bbl of oil and 1.6 MMcm/d (60 MMcf/d) of gas, with dual barrier production risers and dry trees.

Phase 2 could be sanctioned by year-end 2016, but BP Upstream Chief Bernard Looney noted the expansion is subject to partner approval. Partners are BHP Billiton and Chevron Corp., which respectively hold 23.9% and 15.6% interest.

The project is among those that BP is counting on to add 800,000 boe/d of new production by 2020. Other projects that could be sanctioned include Angelin and a compression project, both in Trinidad, Platina in Angola Block 18, Snadd in Norway, India gas projects and additional development of the Khazzan Field in Oman.

“The expectation remains the same, and that is twofold. Number one, it has to hit—each has to hit the hurdle rates, which is driven by value over volume, mid-teens for greenfield and greater than 20% for brownfield and infill,” Looney said. “And the project has got to be the best that it can be.”

—Velda Addison

Offshore