BP’s return to the Gulf of Mexico for the first time in two years may not yield any new oil production until the middle of the next decade, it has emerged.
The owner of the deep-water Macondo well that spewed millions of barrels of crude into the Gulf of Mexico during a 2010 blowout was the highest bidder on 24 blocks offered for lease by the US Department of the Interior this week.
The offers mark the company’s first move for new Gulf of Mexico blocks since a ban on competing for drilling rights was lifted by America’s Environmental Protection Agency last week. The British supermajor had been barred from winning new leases in 2012 over safety concerns.
But while BP has regained credibility with regulators, investors won’t see any upside unless BP discovers oil and constructs platforms and pipelines to deliver it, a process that can take 10 years or more, said Chris Kettenmann, an analyst at Prime Executions Inc.
“Cosmetically, this looks good for BP,” said Mr Kettenmann.
“But it’s not a needle-mover. Getting from yesterday’s sale to exploration to development is a long road map, and it could be a decade before they see any production out of this.
BP’s 31 bids had a total value of £32.5million, with its 24 successful bids costing the firm more than £25million, bureau records showed.
Fifty oil companies bid on 326 blocks offered, with winning bids in the auction totaling $851 million. High bids opened yesterday will be evaluated by government officials before the leases are formally awarded, Caryl Fagot, a bureau spokeswoman, said in an e-mailed statement.
“BP is very pleased at the prospect of adding to our leading leasehold position in this key U.S. offshore region,” said spokesman Brett Clanton.
Chief Executive Officer Bob Dudley said earlier this month the Gulf is one of four “key regions” for the company’s growth.
BP, which counts on the U.S. section of the Gulf for one of every seven barrels of oil it produces worldwide, is still recovering from the aftershocks of the Macondo blowout that killed 11 rig workers, fouled the ocean for months, crippled exploration and so far has cost BP more than £17billion for everything from skimming crude from seawater to testing seafood to bankrolling tourism advertisements.
But despite the company’s output from the Gulf of Mexico falling 62% since the Macondo disaster to an average 174,000 barrels a day in 2013, BP remains the second- largest oil producer in the region, outranking U.S.-based giants Chevron and ExxonMobile.
BP has long experience in turning speculative leases on wildcat prospects into lucrative oil bonanzas, such as the giant Thunder Horse field which was discovered in 1999 but did not begin output until nine years later.
Since the Macondo well erupted on the night of April 20, 2010, BP lost 27 percent of its market value. During that period, the company’s biggest rivals in the Gulf — Shell and Chevron — have gained 8.2 percent and 42 percent, respectively.
The Environmental Protection Agency imposed a suspension in November 2012 that barred BP from lucrative government contracts and new drilling leases in the Gulf, after determining the company hadn’t fully corrected problems that preceded the 2010 disaster. An agreement to lift the ban was announced March 13.
In a sustainability report issued by BP yesterday, the company noted that a U.S.-appointed safety monitor began overseeing its offshore operations in the Gulf of Mexico last month and will continue for a period of up to four years.
The company last acquired 40 new leases in a June 2012 sale. The U.S. has held three offshore auctions since BP was barred from new contracts or leases.
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