Chevron moves ahead with Gulf of Mexico project

FILE PHOTO: The logo of Chevron Corp is seen in its booth at Gastech, the world's biggest expo for the gas industry, in Chiba, Japan April 4, 2017. REUTERS/Toru Hanai/File Photo

(Reuters) - Chevron Corp on Thursday gave the green light to its Anchor project in the Gulf of Mexico and said the deepwater oilfield would require an investment of about $5.7 billion.

Announcing its final investment decision (FID) on the project, the company said first oil from the field is expected in 2024.

“Chevron’s sanction of the Anchor project shows that the U.S. Gulf of Mexico still offers attractive investment opportunities for large greenfield developments,” said Justin Rostant, an analyst with Wood Mackenzie’s Gulf of Mexico team.

The Anchor field is located about 140 miles off the coast of Louisiana and is in water depths of 5,000 feet. It also requires technology capable of handling pressure of 20,000 pound-force per square inch.

The planned facility has a design capacity of 75,000 barrels of crude oil and 28 million cubic feet of natural gas per day. The total potentially recoverable oil-equivalent resources for Anchor are estimated to exceed 440 million barrels.

Chevron, through its unit, holds a 62.86% working interest in the project and is the operator, while Total SA’s unit holds the remaining working interest.

Chevron said earlier this week that it expects writedowns to the tune of $10 billion to $11 billion this quarter related to a deepwater Gulf of Mexico project, which needs higher oil prices to churn a profit. The impairment was also related to its shale gas assets in Appalachia, which has suffered from low natural gas prices.

Anchor is the first of three ultra-high-pressure projects that Wood Mackenzie had expected to reach FID within the next 18 months. The energy research firm estimates that the three projects combined hold about 1 billion barrels of oil equivalent in reserves and will require over $10 billion in capital investments.

Reporting by Arathy S Nair in Bengaluru; Editing by Maju Samuel