BP PLC is moving ahead with a $9 billion oil project in the Gulf of Mexico after a cost-cutting redesign, a sign of confidence about future prices for crude.
The UK-based oil giant announced it would continue with the second phase of its Mad Dog project off the Louisiana coast just a day after OPEC ministers agreed to cut production, a move that sparked a rally in oil prices.
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BP said, however, that the project would be profitable even at or below current oil prices. BP spokesman Jason Ryan said the OPEC decision did not affect the company's decision.
Minority partners BHP Billiton Ltd. and Chevron Corp. have not decided yet whether to invest in the redesigned project.
The companies decided to re-evaluate the project in 2013, citing its initial estimated cost of $20 billion. The project became less attractive when oil prices began tumbling from highs over $100 a barrel in mid-2014.
BP said the project was redesigned to use a different type of floating platform, lowering the cost to $9 billion. It will be capable of pumping up to 140,000 barrels of oil per day from as many as 14 wells, compared with the 80,000 barrels a day capacity of the project's first phase. Production is expected to begin in late 2021.
The slump in oil prices has led companies like Exxon Mobil Corp. and Chevron to cut back sharply on investment in new major projects. Since January, however, oil prices have rebounded from under $30 a barrel. BP said it plans to add 800,000 barrels a day of new production through 2020.
On Friday, benchmark U.S. crude was trading at more than $51 a barrel and Brent crude, the standard for the price of international oils, was over $54.
Shares of BP shares rose 23 cents to $35.62.