With Gulf of Mexico (GOM) activity accelerating, Australia’s BHP has given the green light to Shenzi North, a deepwater project it shares with Repsol SA.
BHP earmarked $544 million in capital expenditures (capex) for the project. The operator took over as majority owner last year and holds a 72% stake. Repsol SA, with a 28% interest, is expected to make a final investment decision later this year.
Shenzi North offers a “nominal” internal rate of return of more than 35%, BHP noted, with a breakeven oil price of around $25/bbl. Payback is estimated in less than two years.
“Shenzi North represents the first development phase of Greater Wildling, following exploration success in 2017,” management noted. “The project will take advantage of existing infrastructure and production capacity in the nearby Shenzi production facility…”
The Shenzi North development includes two wells and subsea equipment with capacity to produce around 30,000 boe/d. Production is expected to ramp in 2024.
BHP’s board also has given its stamp of approval to spend $258 million to advance the front-end engineering design phase for the Trion project in Mexico’s deepwater GOM. Studies would be centered on completing engineering and commercial arrangements toward potentially sanctioning the project by mid-2022.
BHP operates and holds a 60% stake in Mexico blocks AE-0092 and AE-0093, which contain the Trion discovery. A subsidiary of Mexico’s state-owned Petroleos Mexicanos (Pemex) has a 40% interest in the blocks.
“Both Shenzi North and Trion are strong growth assets for our business, providing attractive returns from relatively low carbon intensity resources,” said BHP’s Geraldine Slattery, president of the Petroleum operations.
“Shenzi North is aligned with the petroleum strategy to unlock and deliver further growth options in this key Gulf of Mexico heartland. This board decision also marks an important milestone in advancing the Trion development as we continue to work with our partner Pemex toward a final investment decision in calendar year 2022.”
BHP for years has been an active participant in the U.S. GOM lease sales. It also partners in some of the biggest deepwater projects, including with BP plc in Mad Dog 2. Mad Dog is set to ramp in 2022 with 140,000 b/d of capacity.
Whale Of A Deal
In other news, Williams said it would expand its GOM infrastructure after reaching an agreement with Shell Offshore Inc. and Chevron U.S.A. Inc. to provide natural gas gathering and crude transportation services, as well as onshore gas processing services, for the Whale development.
Whale, about 10 miles from the Shell-operated Perdido host facility, was sanctioned in July.
Williams plans to build a 25-mile gas lateral pipeline from the Whale platform to the existing Perdido gas pipeline. A 125-mile oil pipeline also would be constructed to the existing, Williams-owned GA-A244 junction platform. Natural gas would be transported to the Williams Markham gas processing plant in Matagorda, TX. First production is set to be online in 2024.
“The development of Whale expands Williams’ footprint in the Gulf by contracting one of the largest discoveries in the past decade and creating future connection opportunities for producers that will capture the full value of these important deepwater resources,” said Williams COO Micheal Dunn.
Williams in June agreed to gather and transport natural gas from the Shenandoah development also underway in the GOM deepwater. The agreement is with Beacon Offshore Energy Development LLC and co-owner ShenHai LLC, a Navitas Petroleum LP subsidiary.
Across the GOM, Williams owns and operates 3,500 miles of natural gas and oil gathering and transmission pipeline, along with 1.8 Bcf/d of cryogenic processing capacity and 60,000 b/d of fractionation capacity. In addition, the company has stakes in two floating production platforms, multiple fixed leg utility platforms and numerous related facilities.
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