BHP Sees Bright Spot in Gulf of Mexico, Divests Some Onshore Oil Assets

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Researched by Industrial Info Resources (Sugar Land, Texas)--BHP Billiton plc (NYSE:BHP) (Melbourne, Australia), the world's biggest mining company, this week reported a 13% decline in oil production for fiscal 2017, including a 26% drop from its U.S. onshore business. Industrial Info is tracking more than $22 billion in active projects involving BHP, including more than $12 billion in North America that reflect the waxing and waning fortunes within the company's mining and drilling businesses.

Investors are becoming wary of BHP's oil-related holdings, and the company already is in the process of divesting some of its onshore U.S. shale acreage, including some of its holdings in the Eagle Ford Shale's Hawkville Field. But executives see a brighter future in offshore production, where the near-term economics are more favorable.

BHP has stakes in eight different developments in the U.S. areas of the Gulf of Mexico, two of which it operates. One of those two is the Shenzi Field, where a $350 million offshore drilling program is expected to be completed later this summer. BHP is drilling four infill wells to increase production 15% and extend the life of its investment in the field. The Shenzi Field is in the Green Canyon, one of the most prosperous spots for oil and gas production in the Gulf of Mexico. For more information, see Industrial Info's project report.

The company is planning a $10 million turnaround in second-quarter 2018 at an offshore production platform in Shenzi with a capacity of 100,000 BBL/d of crude oil and 50 million standard cubic feet per day of natural gas; it is expected to last 45 days. BHP's other operational stake in the Gulf is in the Neptune Field, also part of the Green Canyon, where a platform is expected to undergo a $5 million turnaround in second-quarter 2018. This platform has a capacity of 50,000 BBL/d of crude oil and 50 million standard cubic feet per day of natural gas. For more information, see Industrial Info's project reports on the Shenzi and Neptune turnarounds.

BHP's non-operated interests in the Gulf of Mexico include its 23.9% interest in the Mad Dog Field, which is operated by BP plc (NYSE:BP) (London, England). The companies involved, which also include Chevron Corporation (NYSE:CVX) (San Ramon, California), are at work on the $9 billion Mad Dog 2 Crude Oil Production Platform, which is expected to produce 140,000 barrels per day from 14 wells. For more information, see Industrial Info's project report.

BHP produced 37 million barrels of oil equivalent (BOE) from its Gulf of Mexico assets in fiscal-year 2016. The company believes the Shenzi Field has between 350 million and 400 million BOE in gross recoverable resources, while the Neptune Field is believed to have between 100 million and 150 million.

But BHP celebrated an 8% jump in iron-ore output for fiscal fourth-quarter 2017 and predicted 4% growth for fiscal 2018. Executives cited capacity additions and supply chain improvements at its iron-ore facilities as drivers behind the growth in its mining businesses, although record crude-steel production in China has boosted iron-ore prices in the past month. Potash is another area of interest for BHP's mining business: The company believes demand could double by the late 2040s, with the market for the product reaching as high as $50 billion.

BHP announced recently that it will accelerate its $2.6 billion construction of a potash mine and mill in Jansen, Saskatchewan. The company expects the current phase to produce 1.4 million tons per year of compacted granulated potash, and hopes two other proposed phases, which are under prefeasibility study, will bring it up to 8 million tons per year. BHP currently estimates the full, three-phase project could cost up to $16 billion. For more information, see Industrial Info's project report.

In BHP's home country, Industrial Info is tracking a $63.39 million rebuild of a smelter flash furnace at the Olympic Dam in Roxby Downs, South Australia, which involves shutting down and overhauling the 85,000-ton-per-year Outokumpu furnace. BHP announced this week that the dam's smelter operations, which produce copper products for global markets, will be enhanced through a $278.4 million (A$350 million) investment that will cover other aspects of the facility, including the construction of a new electric slag furnace and replacing the electrostatic precipitator. For more information, see Industrial Info's project report.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.