LONDON : BP (BP.L) is ramping up oil exploration and drilling activity in frontier prospects as the energy giant tries to stem a decline in its oil and gas output after years of focusing on a shift to renewables to cut carbon emissions.
The move comes as companies try to balance pressure to slash climate-warming pollution against a desire to capitalise on soaring profits from oil and gas sales, even as governments work to tame energy prices following Russia’s invasion of Ukraine.
BP said that on Monday it started drilling a wildcat, or exploratory, well far off the east coast of Canada which could open a new oil province in one of the world’s most remote locations.
The Stena IceMax drilling ship arrived on Sunday at the site of the Ephesus well in the Orphan basin some 400 kilometres offshore, according to ship tracking data.
Early seismic testing shows the Orphan basin may hold up to 5 billion barrels of oil equivalent (boe), one company source said. BP has drilled for oil there in the past with no success, but continues its search for resources.
It also holds a 35% stake in the nearby Bay du Nord offshore acreage operated by Norway’s Equinor (EQNR.OL), which is considering developing the block after making several discoveries there.
In addition BP has revived in recent weeks plans to develop a complex oil reservoir in the Gulf of Mexico named Kaskida that was shelved a decade ago due technical challenges. The new technology it will use to do so, if successful, could help unlock other similar resources around the world, it said.
BP largely abandoned exploration of new oil and gas frontiers after Chief Executive Officer Bernard Looney in 2020 announced plans to reduce its oil and gas output by 40% by 2030 as part of an ambitious climate strategy.
Instead, BP focused on searching for small reservoirs in basins where it operates such as the Gulf of Mexico, the North Sea and Angola that can be easily and quickly linked to existing platforms.
But Looney decided in February to scale back plans to cut oil and gas output – already down some 10% from 2019 levels – in response to investor pressure, now aiming to cut output by 25% by 2030 to 2 million boe per day.
The focus has once again shifted to discovering, developing and acquiring new resources to offset a 3% to 5% natural decline of fields as reservoirs are depleted.
BP will reach its lower production target mostly through selling ageing oil and gas assets by 2030, while maintaining its underlying production by investing in new fields, Looney said in February.
The group has 15 oil and gas projects, including in Canada, Brazil, Senegal and Mauritania, which it is considering developing after 2025 to sustain its production, Chief Financial Officer Murray Auchincloss told Reuters.
In recent weeks, it has announced plans to acquire a stake from Shell in Australia’s giant Browse gas project, and is also in talks, together with Abu Dhabi’s national oil company, to buy a 50% stake in Israeli gas producer NewMed Energy.
While investing more in oil and gas, BP in February said it was also increasing spending on low-carbon fuels and renewables.
BP now expects to make a final decision on the development of its 100% owned Kaskida reservoir by the second half of 2024, with the field expected to start production by the end of the decade, Auchincloss said.
The Kaskida prospect was discovered in 2006 some 250 miles southwest of New Orleans by the Deepwater Horizon drilling rig, on which 4 years later a deadly blast occurred, leading to the largest oil spill in U.S. history.
The field, which holds an estimated 4 billion barrels of oil, was the heart of a large BP project to develop technology to drill in high pressure and high temperature offshore reservoirs.
The so-called Project 20K aimed to design and develop drilling rigs, subsea production system and blowout prevention equipment to produce oil and gas in reservoirs with extreme conditions of pressure of up to 20,000 pounds per square inch and temperatures as high as 350°F (175°C).
The project was however put on hold in 2013 due to its high costs and technical challenges.
BP has now decided to revive it thanks to improvements in geological analytics and drilling technology, Auchincloss said.
“We always kept Kaskida as an option, and it looks like its time has now come,” he told Reuters.
BP believes that the Kaskida prospect will allow it to unlock other, similar geological reservoirs in the Gulf of Mexico, where it is one of the largest producers, he added.
The group is the front-runner in a licensing round for the Keathley Canyon lease, which contains already-discovered resources that could be used to expand the Kaskida project, according to an internal memo seen by Reuters.