Having already started up three major projects this year, BP Plc (NYSE: BP) said it is on track to crank up four more in 2017, including the Juniper development offshore Trinidad and the mega Zohr gas development operated by partner Eni SpA (NYSE: E) offshore Egypt.
Combined production from the startups will push the major closer toward its goal of adding 800,000 barrels of oil equivalent per day (Mboe/d) of new production by the end of the decade. Gains are already evident with BP reporting a 10% increase in production, excluding Russia, for second-quarter 2017, compared to a year ago, at 2.431 million barrels.
“Looking out to 2020, our major projects are a significant part of our growth wedge to the end of this decade and beyond,” BP Chief Executive Bob Dudley said on the company’s Aug. 1 earnings webcast. “The 800,000 barrels per day of new projects production by 2020 is firmly on track with the portfolio under construction ahead of schedule and around 15% under budget.”
The push is being made as the oil and gas industry copes with lower commodity prices following an activity slowdown sparked by a glut of abundant resources. However, global demand is inching up. The International Energy Agency (IEA) forecast in July that global demand could reach 98 MMbbl/d and climb higher in 2018 to reach 99.4 MMbbl/d.
BP has positioned itself to help meet the anticipated demand by starting up seven oil and gas projects this year.
“In Trinidad, the Juniper facility is progressing through final commissioning activities and startup is expected in the coming weeks,” Dudley said.
The $2 billion project will develop gas resources from the Corallita and Lantana fields offshore Trinidad’s southeast coast via five subsea wells with a production capacity of about 590 million standard cubic feet. The gas will flow through a new six-mile flowline to the Mahogany B hub. Peak annual production for the development is expected to average about 95 Mboe/d. Juniper is operated by BP Trinidad and Tobago, which is jointly owned by BP (70%) and Repsol (30%).
Dudley said Persephone—in which BP has a 16.67% nonoperated stake—offshore Australia is in the final stages of commissioning and is due onstream in the third quarter. The LNG project, operated by Woodside Petroleum Ltd., is being developed as a two-well subsea tieback to the North Rankin complex.
The other two projects slated for startup in 2017 are the Eni-operated Zohr Field, which holds an estimated 30 trillion cubic feet of gas in place, and the Khazzan Phase 1 in Oman.
Located in the Mediterranean Sea in the Shorouk Concession in a water depth of about 4,900 ft, Zohr is expected to have a peak annual average production rate of about 440 Mboe/d. The 25-well long-distance tieback will pipe gas for processing through a new seven-train onshore plant, BP said.
Phase 1 of the BP-operated Khazzan tight gas project aims to develop about 7 trillion standard cubic feet of gas. As explained by BP, plans include drilling about 200 wells and constructing a two-train central processing facility.
Dudley attributed recent production growth—which came as first-half 2017 production costs fell by 18%—to the renewal of Abu Dhabi National Oil Co.’s ADCO onshore oil concession, major project startups and “good underlying performance of our assets.”
First-half 2017 project startups included:
- West Nile Delta-Taurus/Libra in Egypt in March;
- Trinidad onshore compression in April; and
- The North Sea Quad 204 oil project, with the Glen Lyon FPSO vessel, in May.
BP said its oil and gas production will be flat in the third quarter as project startups outweigh maintenance, according to a Reuters report.
CFO Brian Gilvary told Reuters that BP’s 2017 capital spending was expected to be about $16 billion, which is in the middle of the forecast range.
However, Banco Santander analyst Jason Kenney said he saw “optimism that BP could move forward with more robust delivery than currently expected in second-half 2017 and going into 2018.”
During the webcast, Dudley said, “You will see the impact of our 2017 major projects toward the back end of the year with production ramping up as we go into 2018.”
BP is starting up major projects as it works to bring more projects online ahead of schedule and sanctions others, including the R Series deepwater gas project in Block KGD6 offshore India and the Angelin gas project offshore Trinidad.
“Looking further ahead we have a strong portfolio that we continue to optimize and test against our hurdle rates and that gives us a lot of options, with only the best and most competitive going forward to FID within the discipline of our capital frame,” Dudley said. “So we’ve made a lot of progress already this year in upstream. We’re right on course with where we want to be with the execution of our current set of projects, and we’re progressing in a very disciplined way with our plans for future growth.”
Velda Addison can be reached at email@example.com.