Chevron equipment loss in rough seas challenges growth plan
CHICAGO, Illinois (Bloomberg) -- Chevron Corp. indefinitely delayed a $5.1-billion oil development in the U.S. Gulf of Mexico after an equipment failure, casting doubt on the company’s ability to meet its target of 20% output growth by the end of 2017.
Some of the cables needed to tether a floating platform to the seafloor sank between May 29 and May 31, the San Ramon, California-based company said in a statement. None of the wells at the Big Foot oilfield had begun pumping crude and there were no spills or injuries.
Chevron has spent billions of dollars and the better part of a decade preparing the deepwater field for production, which had been scheduled to begin later this year. Discovered in 2006, Big Foot was one of the linchpins in CEO John Watson’s plan to increase Chevron’s global production to the equivalent of 3.1 MMbopd over three years.
The platform is designed to collect oil and natural gas from wells in the field, strip out hydrogen sulfide and brine, and send the fuels to shore on pipelines. The oilfield is located about 225 miles (362 kilometers) south of New Orleans in waters 5,200 feet deep in a section of the Gulf that experiences violent currents akin to underwater hurricanes, and waves that ebb and flow hundreds of feet beneath the surface.
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The currents “pluck and pick steel pipes like they’re nylon guitar strings,” Chevron said in the September 2008 issue of its in-house technology magazine, Next.
The platform was moved to “sheltered waters,” the company said. Chevron fell 0.3% to $102.37 at 10:04 a.m. in New York. The shares are down 8.8% this year.
The setback may worsen the impact of lower crude prices that have eroded cash available for exploratory drilling and the acquisition of new prospects. Every $1 decline in the price of Brent crude, the global benchmark, cuts $325 million to $350 million from Chevron’s quarterly cash flow.
Big Foot is one of several marquee developments around the world that Chevron leads or is a major investor in. Others include the Gorgon and Wheatstone gas-export projects in Australia, which together will cost more than $80 billion, the $10 billion Moho Nord field in the Republic of Congo and the $5.6 billion Mafumeira Sul venture in Angola.
Liquefied natural gas is slated to account for the largest chunk of Chevron’s output growth between now and the end of 2017, followed by offshore crude and shale, the company said in a March presentation to investors.
