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BP has approved the Mad Dog Phase 2 project located in the Gulf of Mexico, underlining the company’s commitment in the US, despite the present low oil price environment.

The project comprises a new floating production platform, holding a capacity to produce up to 140,000 gross barrels of crude oil per day, from up to 14 production wells.

The company expects to commence oil production by late 2021.

"This announcement shows that big deepwater projects can still be economic in a low price environment in the US."

BP Group chief executive Bob Dudley said: “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.”

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By GlobalData

In 2013, project operator BP (60.5% interest) and co-owners BHP Billiton (23.9 %) and Union Oil Company (15.6%) decided to re-assess the Mad Dog Phase 2 project as the initial design was too complicated and costly.

Since then, BP has worked with co-owners and contractors to simplify and standardise the platform’s design, reducing the overall cost by nearly 60%.

Now, BP expects that this project, which includes the capacity for water injection, will be profitable even at current oil prices.

BP Gulf of Mexico business president Richard Morrison said: “Mad Dog Phase 2 has been one of the most anticipated projects in the US deepwater and underscores our continued commitment to the Gulf of Mexico.

“The project team showed tremendous discipline and arrived at a far better and more resilient concept that we expect to generate strong returns for years to come, even in a low oil price environment."

BP already made its final investment decision on Mad Dog Phase 2 while the co-owners are expected to make their decision in near future.

The field was discovered by BP in 1998 and first production commenced in 2005. Further appraisal drilling in 2009 and 2011 doubled the field’s resource estimate to more than four billion barrels of oil equivalent, prompting the requirement of another platform.

The second platform will be moored approximately six miles to the southwest of the existing Mad Dog platform, which is located in 4,500ft of water, around 190 miles south of New Orleans, US.

The current Mad Dog platform can produce up to 80,000 gross barrels of oil and 60 million gross cubic feet of natural gas per day.

Image: Mad Dog Phase 2 Subsea Layout. Photo: Courtesy of BP.