BP has approved the $9bn (£7.15bn) Mad Dog Phase 2 project in the US Gulf of Mexico region, the British oil major announced on Thursday (1 December).
The move highlights its long-term commitment to the US despite the current environment of low oil prices, it said. The decision comes just days after Opec members announced a deal to cut oil production in an effort to raise prices of the commodity. Oil prices have since crossed the $50 per barrel levels.
While BP is not the sole owner of this project, it holds a majority working interest of 60.5%. Co-owners include BHP Billiton that holds a 23.9% stake and Union Oil Company of California, an affiliate of Chevron that holds a 15.6% stake.
The project was to start years ago but the companies decided against going ahead as the initial design proved too complex and expensive. In 2013, they decided to re-evaluate the project.
BP said it worked with co-owners and contractors to simplify and standardise the project, which helped reduce the total project cost by about 60% to $9bn.
Commenting on the same, Bob Dudley, CEO at BP, said in a statement, "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...It also demonstrates the resilience of our strategy which is focused on building on incumbent positions in the world's most prolific hydrocarbon basins while relentlessly focusing on value over volume."
BP said the project will include a new floating production platform and up to 14 production wells, with the capacity to produce up to 140,000 gross barrels of oil per day. Production from this project was expected to begin in late 2021, the British firm said.
While it had reached a final investment decision (FID) on this project, its co-owners were expected to make the same in the future, the company added.