Woodside, Mitsui to invest $1.9 billion in Greater Enfield oil development

TOKYO (Reuters) - Australia’s Woodside Petroleum Ltd and Japanese trading firm Mitsui & Co Ltd said on Monday that they would invest $1.9 billion to develop the Greater Enfield reserves, a group of oil fields off Western Australia.

The move is the latest indicator that some life is returning to the drained offshore oil and gas drilling sector, which was all but knocked out by a 70 percent slump in oil prices between 2014 and early 2016. But with prices up nearly 30 percent this year, activity is starting to pick up.

“With development costs of less than $28 a barrel, Greater Enfield is an attractive project in a low-price environment,” Woodside Chief Executive Peter Coleman told Reuters in an email.

The recoverable reserves of the new Laverda oil fields and the Cimatti fields in the Greater Enfield development are estimated at 69 million barrels of oil equivalent, a little more than twice the daily output of the OPEC.

Woodside, which holds a 60 percent stake in Greater Enfield, and Mitsui that owns the rest will invest in drilling production wells and constructing subsea facilities, with an aim to start crude oil production by around mid-2019.

“We’ve made a final decision as development costs have fallen due to sliding oil prices,” a Mitsui spokeswoman said.

The new oil fields can use the floating production storage and offloading facilities currently in use in the existing Vincent oil field, further cutting expenses, she added.

Earlier in the day, commodities giant BHP Billiton said it planned to boost its fiscal 2016 exploration budget, focusing on offshore developments in the Gulf of Mexico and off the coast of Western Australia.

Oil futures are now near $50 per barrel, off more than 12-year lows plumbed earlier this year but still far below their 2014 peaks of above $100. The price uncertainty is, however, far from over, especially with Britain’s decision to leave the European Union dragging on sentiment. [O/R]

Weak energy markets had forced Woodside and its partners, in March, to shelve plans for the $30-billion Browse floating liquefied natural gas (LNG) project off Australia.

Coleman subsequently said future LNG projects would likely be phased, rather than big one-off developments.

U.S. gas prices have also risen more than 10 percent this year, prompting Japan’s Tokyo Gas to buy a 25 percent stake in an Eagle Ford shale gas formation.

Reporting by Yuka Obayashi and Jim Regan; Editing by Aaron Sheldrick and Himani Sarkar