BP Looks To Ramp Up Gulf Of Mexico Activity
Author: Prashant Mehra and Henry Foy
BP Plc is looking to ramp up activity in the Gulf of Mexico in the coming months and is applying for new well permits there this quarter, an executive said on Tuesday, as the firm looks to move on from a huge oil spill last year.
The London-listed firm, which has failed to convince investors of its post-spill strategy, could take up to two years to increase output from a key gas field of India's Reliance Industries Ltd, another executive said.
BP, Europe's second-largest oil company by market capitalization, has struggled since President Barack Obama banned drilling in the Gulf from late May to mid-October last year after BP's deepwater Macondo well ruptured and spewed more than 4 million barrels of oil into the basin.
"We are the largest piece holder in the Gulf of Mexico and hence containment activities had a disproportionate impact on BP," Executive Vice President Steve Westwell told Reuters on Tuesday.
"We will get back to drilling new wells. Our first focus is to secure wells that have been drilled. We will, in the course of this quarter, be applying for permits for new wells," Westwell said, speaking on the sidelines of a conference.
The firm said in July that it hoped to restart drilling in the Gulf by the end of the year, as its output of 250,000 barrels a day from the region, down from 400,000 barrels a day pre-Macondo, contributed to lower-than-expected second quarter earnings.
"The third quarter should be the low point of production, from here we should see production and cash flows improving," Westwell said.
BP, the largest oil producer in the Gulf, has received one permit so far this year, allowing the company to plug and abandon a well it had drilled before the spill.
Executives said in July the firm aims to seek permits to drill production wells in its prolific Thunder Horse and Atlantis oil fields, as well as new exploration and appraisal wells.
U.S. regulators did not begin approving permits until late February, after industry consortiums had established rapid-response systems to contain and control a Macondo-like spill.
Competitors such as Royal Dutch Shell, Chevron Corp and Exxon Mobil Corp have all received permits to drill in the Gulf since the spill, a market analyst told Reuters in July.
BP's $7.2 billion deal to buy a 30 percent stake in 21 oil and gas blocks from Reliance , one of the largest investments in India's oil and gas sector, is seen boosting output from the KG D6 deepwater blocks off the country's east coast.
"We have just received the approval. We are studying the data. We are confident that there is more gas and output can be raised. But these things take time, it may take a couple of years," BP India head Sashi Mukundan said on Tuesday.
Reliance, the country's largest listed firm, has been under pressure over the past few months from an industry regulator and investors over slowing gas output from its main D6 block in the KG basin off India's east coast.
In May, the director general of hydrocarbons said the company was producing 48 mscmd (million standard cubic meters per day of gas) from the block, lower than 60 mscmd it produced last year and far off the planned peak capacity of 80 mscmd.
BP is open to more deals in Asia's third largest economy, Westwell added, following the Reliance acquisition, which was approved by India's cabinet in July.
"India is going to be one of the world's great markets for companies like us," Westwell said.
"If we see another opportunity as exciting as this (Reliance deal), we will certainly be interested," he said.
Shares in Reliance closed at 821.50 rupees ($17.86), up 4.1 percent, in a Mumbai market that was up 0.9 percent. The stock has fallen more than 20 percent so far this year, mainly triggered by concerns about slowing D6 output.
Shares in BP are down 22 percent this year.
($1 = 45.993 Indian Rupees)
(Editing by Jui Chakravorty)