Chevron Big Foot
Chevron plans $4 billion Gulf project
Brett Clanton Houston Chronicle
HOUSTON — Chevron Corp. has given another multibillion-dollar vote of confidence to the future of oil and gas activity in the deepwater Gulf of Mexico.
Despite lingering regulatory uncertainty in the U.S. offshore region created by the BP oil spill, the nation’s second-largest oil company after Exxon Mobil said Thursday it will spend $4 billion over the next several years to develop its Big Foot field, 225 miles south of New Orleans.
The move comes less than two months after the San Ramon, Calif.-based oil giant approved a $7.5 billion project to develop its Jack and St. Malo fields in the deepwater Gulf, one of the biggest investments ever in the region. And it’s the latest sign of the area’s strategic importance to Western oil companies as the global hunt for oil becomes more difficult.
“The fact that one operator has approved this amount of capital expenditure really shows in a tangible way the value of the deepwater Gulf of Mexico,” said Matt Pickard, a senior market analyst with Quest Offshore Resources in Sugar Land.
At Big Foot, Chevron plans to build a tension-leg platform capable of producing 5,000 barrels of oil and 25 million cubic feet of natural gas per day. However, because of the massive scale of the project, production is not expected to begin until 2014.
Chett Chiasson, executive director of Port Fourchon, the Gulf’s main supply point for deepwater offshore oil activity, said that despite a slow regulatory process, the industry’s largest companies are continuing to focus on the massive reserves located in waters more than 1,000 feet down.
“I know most of the majors are focusing on deepwater,” he said. “That’s good for our future, hopefully.”
Kerry Chauvin, CEO of Gulf Island Fabrication, said he could not comment on whether the company would seek bids on the project. Still, to see them go forward is a good sign, he said.
“That’s very encouraging for the whole industry,” he said.
The long development timeline is typical of complex deepwater projects, which often take a decade or more from the time of discovery to yield their first drops of oil. Chevron, for instance, announced its Big Foot discovery in 2006.
Located in 5,200 feet of water in an area known as Walker Ridge, the field is estimated to hold total recoverable resources in excess of 200 million oil-equivalent barrels, the company said.
Chevron holds a 60 percent stake in Big Foot and is the operator, while Norway’s Statoil has a 27.5 percent stake and Japan’s Marubeni has 12.5 percent.
With crude prices hovering near $90 a barrel, oil companies have plenty of incentive to pursue such large-ticket projects. But many have been cautious about new investments in the Gulf in the wake of the Deepwater Horizon accident in April.
The rig explosion at BP’s Macondo well, which killed 11 and touched off the nation’s worst oil spill, spurred regulators to enact a raft of new safety and environmental requirements that the industry fears will drive up costs. Those rules have stalled approval of new drilling permits in the Gulf, though a federal moratorium on deep-water activity was lifted in October. And more changes are expected as federal investigative panels into the BP accident make recommendations in coming months.
Delays created by the government moratorium and related issues are likely to cut into anticipated oil production from the Gulf in coming years.
Prior to the Macondo incident, oil and gas output from the deepwater Gulf was expected to hit 1.5 million barrels per day by 2015, up from 1.2 million barrels this year, said Leta Smith, director of IHS CERA’s E&P Trends Forum in Houston. Now, it is expected to fall to 1.1 million barrels per day by 2015, she said.
But Chevron’s decision to green-light Big Foot — its sixth operated facility in the deepwater Gulf — demonstrates the company’s ongoing commitment to the region, said George Kirkland, Chevron’s vice chairman.
It’s also “another example of Chevron’s disciplined approach to advancing our enviable queue of major capital projects,” he said in a statement.
To help those projects, Chevron said this month it will boost its 2011 global capital and exploration budget by 20 percent to $26 billion.
In the U.S., the company plans to spend $5.4 billion on upstream oil and gas projects next year, including the Jack and St. Malo and Big Foot projects, as well as a second phase of its Tahiti complex, further work at the Perdido hub and more drilling at its Buckskin discovery, the company said.
Staff Writer Kathrine Schmidt contributed to this report.