BHP to spend over $800 million on Shenzi and Trion projects
Australia’s BHP has approved a total of $802 million in capital expenditures to execute the Shenzi North project in the U.S. Gulf of Mexico and to move the Trion project off Mexico into the FEED phase.
BHP on Thursday approved $544 million in capital expenditure to execute the Shenzi North oil project. The capital expenditure approved represents a 100 per cent share interest. BHP noted that the project offers very attractive returns at a nominal IRR of over 35 per cent, a breakeven of approximately $25/bbl and a payback of less than two years.
BHP is the operator and holds a 72 per cent share in Shenzi North. The company increased its interest in the field to 72 per cent following the acquisition of Hess’ 28 per cent interest in November 2020. Repsol holds the remaining 28 per cent working interest and is expected to make a Final Investment Decision (FID) later this calendar year.
Shenzi North represents the first development phase of Greater Wildling, following exploration success in 2017, with the resource and development plan further refined through Ocean Bottom Node seismic data and analysis.
The project will take advantage of existing infrastructure and production capacity in the nearby Shenzi production facility, with value further enhanced through the recent increase of working interest.
The project adds two wells and subsea equipment to establish a new drill centre north of Shenzi with the capacity to produce up to approximately 30 mboe per day. BHP said that the production is expected to begin in the 2024 financial year.
McDermott was in June 2021 put in charge of a marine installation campaign for the Shenzi subsea multiphase pumping project. The scope of work includes project management, design and fabrication of a pump station suction pile, umbilical installation and flexible jumpers and flying leads installation, transport of materials and equipment, and pre-commissioning services and other necessary testing and surveys.
In addition, the BHP board has also approved $258 million in capital expenditure to move the Trion oil project in Mexico into the Front End Engineering Design (FEED) phase. The focus of these studies will be on the completion of the engineering, commercial arrangements and execution planning required to progress to a Final Investment Decision from the mid-calendar year 2022.
BHP holds a 60 per cent participating interest in and operatorship of blocks AE-0092 and AE-0093 containing the Trion discovery located in the deepwater Gulf of Mexico offshore Mexico. Pemex holds a 40 per cent interest in the blocks.
McDermott is also providing a front-end engineering design (FEED) for a semi-submersible floating production unit (FPU) for the Trion project.
Geraldine Slattery, BHP President Operations Petroleum, said: “Shenzi North is aligned with the petroleum strategy to unlock and deliver further growth options in this key Gulf of Mexico heartland. This board decision also marks an important milestone in advancing the Trion development as we continue to work with our partner Pemex towards a Final Investment Decision in the calendar year 2022″.