Chevron, BP, and ConocoPhillips form Gulf of Mexico alliance

Chevron Corp.’s subsidiary, Chevron USA Inc., will work with BP and ConocoPhillips to explore and appraise 24 jointly held offshore leases in the northwest portion of Keathley Canyon in the deepwater Gulf of Mexico. Chevron will be the operator.

The transaction encompasses the Tiber and Gila discoveries, and the Gibson exploratory prospect. Chevron recently acquired an interest in Tiber and Gila from BP. Chevron, BP, and ConocoPhillips already held interests in the Gibson prospect. The scope of the collaboration includes further exploration and appraisal of these leases, as well as evaluating the potential of a centralized production facility, which would provide improved capital efficiency, similar to Chevron's Jack/St. Malo project.

The recent discovery at Guadalupe, located adjacent to Keathley Canyon, could also be developed by utilizing the centralized production facility. Chevron, BP, and Venari, the Guadalupe co-owners, will evaluate this possibility during the upcoming appraisal phase of that discovery.

The companies’ new ownership and operating model will focus on moving two BP Paleogene discoveries closer to development and provide expanded exploration access in the emerging geologic trend in the deepwater Gulf of Mexico. Under this new ownership structure, Chevron, BP, and ConocoPhillips will combine expertise and resources to unlock the Tiber and Gila discoveries and to also pursue development of a new production hub in Keathley Canyon.

Under the agreements, BP will sell to Chevron approximately half of its current equity interests in the Gila and Tiber fields. BP, Chevron, and ConocoPhillips also have agreed to joint ownership interests in exploration blocks east of Gila known as Gibson, where they plan to drill in 2015.  

As a result of the agreements, BP, Chevron, and ConocoPhillips will have the same working interests across Gila and Gibson and any future centralized production facility. Chevron will hold equity interest of 36%, while BP will have 34%, and ConocoPhillips will have 30%. In Tiber, BP and Chevron will each hold equity interest of 31%; Petrobras, 20%; and ConocoPhillips, 18%.  

Chevron will operate Tiber, Gila, and Gibson, building on its startup of the Jack/St. Malo oil production platform in the Paleogene/Lower Tertiary. Operatorship is expected to be transferred after BP finishes drilling appraisal wells at Gila and Tiber. 

The alliance will help the companies achieve efficiencies in scheduling, cost savings, and human resources.

Jeff Shellebarger, president of Chevron North America Exploration and Production Co., said, "By collaborating across several prospects and discoveries, and incorporating the technologies and experience of the three companies, we expect to develop these fields in the most cost-effective way and shorten the time to final investment decision and first production."

Richard Morrison, president of BP’s Gulf of Mexico business, commented, “Completing these agreements will enable BP to do three things that are at the core of our strategy in the deepwater Gulf of Mexico. It will support continued exploration and development in the Paleogene, which we expect to be a key part of our future in the region. It will allow us to manage and maintain capital discipline by sharing development costs. And transferring operatorship of these assets to Chevron will allow BP to increase our focus on maximizing production at our four existing producing hubs in the Gulf, each of which is still in the early stages of development.”

BP discovered Tiber in 2009 and Gila in 2013, and, in October 2014, the company participated as a co-owner in the Chevron-operated Guadalupe discovery. 

BP believes that development of portions of the Paleogene trend will require next-generation tools and systems for operating in high-pressure, high-temperature reservoirs. BP says it continues to pursue development of these technologies through its Project 20K initiative, announced in 2012, and will work with co-owners to continue this progress.

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