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BP Allies with Chevron, ConocoPhillips in Deepwater GOM

BP plc on Wednesday agreed to sell half of its equity -- and its control -- in two key deepwater Gulf of Mexico (GOM) discoveries and partner with Chevron Corp. and ConocoPhillips to develop prospects and a production hub in Keathley Canyon, one of the most sought-after lease areas of the Lower Tertiary Trend.

Under the agreements, BP is giving operatorship to Chevron and selling a 36% stake in the Gila prospect; it would keep 34%. BP also is selling half (31%) of Tiber to Chevron. Affiliates of the trio jointly would own the Gibson prospect east of Gila, where they plan to drill this year. Chevron also would operate Gibson. The three partners would have the same equity in any future centralized production facility. No financial details were disclosed.

Keathley Canyon has been an integral part of BP's GOM exploration plans for years. After the Macondo tragedy, a Keathley drilling permit was the first approved for BP by federal officials (see Daily GPIOct. 27, 2011). BP remains the top driller in the deepwater GOM today. However, like so many recent announcements by other energy firms, the agreements center around maintaining capital discipline.

"Completing these agreements will enable BP to do three things that are at the core of our strategy in the deepwater Gulf of Mexico," said BP GOM President Richard Morrison. "It will support continued exploration and development in the Paleogene, which we expect to be a key part of our future in the region. It will allow us to manage and maintain capital discipline by sharing development costs.

"And transferring operatorship of these assets to Chevron will allow BP to increase our focus on maximizing production at our four existing producing hubs in the Gulf, each of which is still in the early stages of development."

BP acknowledged that Chevron's operatorship builds on its recent success in starting up the massive Jack/St. Malo platform in the Lower Tertiary Trend, which got underway late last year (see Daily GPIDec. 3, 2014). Chevron also hit more pay in the Lower Tertiary earlier in January, building on the nearby Guadalupe discovery last year in which BP participated (see Daily GPIJan. 6Oct. 23, 2014).

"By collaborating across several prospects and discoveries, and incorporating the technologies and experience of the three companies, we expect to develop these fields in the most cost effective way and shorten the time to final investment decision and first production," said Jeff Shellebarger, president of Chevron North America Exploration and Production Co.

Guadalupe could be developed using the proposed centralized production facility, Chevron noted. Co-owners are Chevron (42.5%), BP (42.5%) and Venari Resources LLC (15%), which plan to evaluate the possibility during the upcoming appraisal phase. Operatorship of Gila and Tiber would be transferred once BP finishes the appraisal wells (see Daily GPIDec. 27, 2013). In the Tiber field, Brazil's Petrobras still would control 20%, with ConocoPhillips holding 18%.

Combining the technical strengths and financial resources of the three big operators is expected to provide more efficiency, reduce subsurface risk and increase the likelihood of achieving a future commercial development, BP noted. Developing portions of the Paleogene trend is going to require "next-generation tools and systems for operating in high-pressure, high-temperature reservoirs."

The London-based oil major has been developing deepwater technologies through Project 20K and now plans to work with the co-owners on more advancements (see Daily GPI,Nov. 13, 2012).

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