A Rise of the Phoenix for BP?
Anirban is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Technology has an impact on everyone’s life both as a boon and as a curse. In fact, the advance of technology made it possible for companies such as BP (NYSE: BP) to move to the deep-waters in search of oil and gas reserves. This helped the company to position itself as a superpower in the world oil and natural gas sector. However, the same technology led to a spill of crude oil in those deep waters of the Gulf of Mexico whose after effects are to be felt for many years to come. And now after 2 years since the spill, BP is back with a fresh operation in the area and is targeting to produce 26,000 barrels of oil at the Galapagos development.
BP has been present in the deep-waters of the Gulf of Mexico for more than 25 years and is the largest leaseholder in the off-shore area. BP holds interest in some of the best fields in the area and is also the largest producer of oil in the area. After the 2010 tragedy which resulted in the spillage of more than 4 billion barrels of crude oil in the waters and also killed 11 people, BP and its partner Anadadarko (NYSE: APC) were forced to stop operations there and are also facing a lawsuit with major damages. But in October last year, BP received its first permission from the U.S. authorities to drill in the area since the incident. Chevron (NYSE: CVX), which also faced a similar incident in the off-shores of Brazil is facing problems in getting new permissions to drill.
BP has already put up its stake in TNK-BP for sale. This is a joint venture in Russia, and its sale will decrease BP’s overall production by almost 30%. Now BP has to find alternate places to increase production and given the prospect BP has in the area with the presence in the most number of and in the highest quality leases, the Gulf of Mexico off-shore area provides a good prospect for the company. Adding to that the experience that the company has garnered working in these deep waters will surely provide the company an added advantage for its resurrection as a major producer in the area. The Gulf of Mexico is going to be a key area for the development of the company.
BP also operates the Na Kika facility which has been modified to handle output from the three fields of the Galapagos development and a new production flowline loop has been added to transport oil produced from these three fields to the facility.
The Bottom Line
So, whatever may be the situation, BP has to garner the best acreages that they own to keep the revenue rolling and for the sustainable growth of the company. The fact that BP is also trying to part away with its share in TNK-BP, though BP has the option of seeking new acreages in the area, finding new licenses to drill off the shores of the Gulf of Mexico will help the company to boost its top line. Keep an eye on the stock.
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