On Friday, BHP approved US$544 million in capital expenditure to execute the Shenzi North oil project in the US Gulf of Mexico.
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. 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. Production is expected to begin in the 2024 financial year.
The capital expenditure approved represents a 100% share interest in the project, which is expected to return a nominal IRR of over 35%, and a breakeven of approximately US$25/bbl with payback in less than 2 years. BHP is the operator and holds a 72% share in Shenzi North, while Repsol holds the remaining 28% working interest and is expected to make a Final Investment Decision later this calendar year.
In addition, the BHP also approved US$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 mid-calendar year 2022.
Geraldine Slattery, BHP President Operations Petroleum, said “Both Shenzi North and Trion are strong growth assets for our business, providing attractive returns from relatively low carbon intensity resources. 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 calendar year 2022.”