BP’s (NYSE:BP) plans to initiate the second phase of its Mad Dog project in the Gulf of Mexico are on hold, according to company sources. Citing bad market conditions and rising inflation in the oil industry, company spokespeople declined to comment on when the project would be revived. The move followed several other major companies’ pullback from planned projects.
The Gulf of Mexico site where BP planned to start the second phase of Mad Dog is still a sore spot for the oil giant. In 2010, the biggest oil spill ever off the coast of the U.S. prompted a multi-billion dollar settlement and bad press worldwide. BP was planning to get production going with this project and was to invest close to $10 billion to access the oil-rich reserves and potentially start bringing the oil to consumers by the end of the current decade.
The company’s decision will stop effectively that momentum, leaving BP with the recent court defeat in the Deepwater Horizon settlement as its primary concern in the Gulf of Mexico area. The oil spill required a giant settlement following the damage caused to human lives, property and business in the region. The mining industry will take another major hit following the halting of the Mad Dog project…
The cost of drilling and construction elements in the Mad Dog project were the chief causes of concern among BP analysts when crunching the numbers. Similar concerns forced Woodside Petroleum (ASX:WPL) to pull back from its gigantic natural gas project planned for Western Australia. Industry momentum has slowed, leaving many to question the supply capabilities of the largest corporations in the coming years.
BP planned on teaming with Union Oil and Chevron (NYSE:CVX) in the second segment of Mad Dog development. Analysts have pointed out that the drop in crude oil prices might have prompted BP to make a second evaluation before beginning the enormous project. In a week dominated by news of gold mining’s slump, offshore industries are continuing to hear reports of a loss in confidence among the world’s biggest drilling companies.
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