(Corrects Gulf of Mexico share in fourth paragraph to 'tenth'
* Company reviews Mad Dog 2 expansion due to cost inflation
* Says too early to speculate when final plan will be
* Construction had been due to start by end of this year
* Analyst says delay of around 12 months is possible
By Peg Mackey and Sarah Young
LONDON, April 19 BP is reviewing its
biggest new oil project in the Gulf of Mexico, due to rising
development costs across the industry, and could delay the $10
British oil major BP said on Friday that rising costs made
the current plan, under which construction would start this
year, difficult to justify, becoming the latest company to
reconsider the economics of a major project.
"The current development plan for Mad Dog Phase 2 is not as
attractive as previously modelled, due largely to market
conditions and industry inflation," it said in a statement.
The company wants to get its core Gulf of Mexico business,
which accounts for around a tenth of its global output, back on
track after the disastrous 2010 Macondo oil spill, which is
still the subject of a court case in New Orleans.
It classes Mad Dog 2 as a "mega project", meaning it
requires gross investment of more than $10 billion.
Construction of Mad Dog 2, set to become BP's biggest new
oil development in the Gulf for a decade, had been scheduled to
start by the end of this year and the company has said oil
should start pumping by the end of the decade.
"BP fully intends to develop the resources at Mad Dog Phase
2 and is committed to moving forward with the right plan," it
said. "It is too early to speculate when the details of the
final plan will be approved by BP and its co-owners."
Elsewhere in the industry, cost over-runs prompted Woodside
Petroleum to consider a different plan for its $45
billion Browse liquefied natural gas project in Western
Australia in April.
France's Total said in March it was abandoning a
multibillion-dollar oil sands project in Canada.
BP, in cooperation with co-owners Union Oil Company of
California, a wholly owned subsidiary of Chevron Corp.,
and BHP Billiton Petroleum , is now evaluating
how to develop the second phase of Mad Dog.
"I see it as a delay. I think it'll probably push back the
final investment decision by, I would estimate, about 12
months," Macquarie analyst Jason Gammel said.
A tumble in the oil price, which is down nearly $10
a barrel since the start of this month, could also be weighing
on BP's plans for the deep-water field.
The oilfield could contain up to 4 billion barrels of oil
equivalent (boe). Mad Dog 2 involves building a second platform
on the field and 33 subsea wells to exploit new discoveries.
Shares in BP traded up 1.1 percent, outperforming the
European oil and gas index which was 0.4 percent higher.
(Editing by Anthony Barker)