Chevron Corp. (CVX) said Thursday it will invest $4 billion to develop the Big Foot oil field in the deepwater Gulf of Mexico.
Chevron Corp. (CVX) said Thursday it will invest $4 billion to develop
the Big Foot oil field in the deepwater
Gulf of Mexico
.
The newly approved project is expected to have a production capacity of 75,000
barrels of oil and 25 million cubic feet of natural gas per day. Production is
expected to start in 2014, in water depths of 5,200 feet, approximately 225
miles south of
New Orleans
.
The decision follows Chevron's October move to invest $7.5 billion to develop
two other massive oil fields in the area, showing the oil giant still sees the
Gulf
of Mexico
as a key driver of its long-term production
growth, despite uncertainty over fallout from the BP PLC (BP, BP.LN) oil spill.
The federal government is imposing stricter rules for the offshore energy
industry in the aftermath of the deadly explosion and sinking of the deepwater
drilling rig in April, which unleashed the worst accidental offshore spill in
U.S.
history.
The U.S. Gulf remains an attractive bet for
U.S.
oil
companies as one of the only remaining spots where state-run firms don't have
first crack at major new discoveries.
"We have a fundamental belief that the industry and the government will
work through permitting issues and safety regulations and that the energy
business will continue in the
Gulf of Mexico
after
this process," Steve Thurston, Chevron's vice president for deepwater
exploration projects, told Dow Jones in an interview. Stopping investment in
the Gulf is not "acceptable" either for companies or for the
government, Thurston said.
Big Foot, discovered in 2006, will be Chevron's sixth operated project in the
Gulf
of Mexico
's deepwater. The field is located in a region of
the Gulf known as the ultradeep Miocene formation, where the energy industry
has made several large finds in recent years, including the doomed Macondo
field discovered by BP, which leaked millions of barrels of oil into the Gulf.
Chevron will focus next year on the manufacturing of Big Foot's facility. Drilling
activity will restart only at the end of 2011, by which time Chevron expects
the permitting process, currently slowed down by an onslaught of new
regulation, to have returned to normal. "We certainly believe we will have
all the bumps on the road around the permitting handled by that," Thurston
said.
Chevron holds a 60% interest in the project, while
Norway
's
StatoilHydro ASA (STO) and
Japan
's
Marubeni Corp. (8002.TO) have stakes of 27.5% and 12.5%, respectively.
Chevron confirmed in 2009 that it held talks with China National Petroleum
Corp. to sell a stake in Big Foot in order to share costs of development. The
talks were not successful.
Chevron, the second-largest
U.S.
oil-and-gas company by market value after Exxon Mobil Corp. (XOM), has been
spending heavily in the last five years to reverse a rapid decline in
production. The company said Dec. 9 it will increase its capital expenditure
budget by 20%, to $26 billion in 2011, with 85% going to exploration and
production.
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