Exxon Tries to Put the Worst Behind it With $20 Billion Writedown
By Jennifer Hiller HOUSTON, Nov 30 (Reuters) – Exxon Mobil Corp on Monday said it would write down the value of natural gas properties by $17 billion to $20 billion,...
By Tennille Tracy, The Wall Street Journal
WASHINGTON—The U.S. has decided to allow BP PLC to bid on new oil-drilling leases that go up for sale in the Gulf of Mexico later this year, less than two years after BP’s Macondo well erupted and caused the worst offshore oil spill in U.S. history.
While testifying at a House hearing Thursday, U.S. offshore-safety chief Michael Bromwich said his agency “considered and thought about this issue quite a lot,” but eventually determined to allow the British oil giant to bid for leases in an upcoming auction known as Lease Sale 218.
“We don’t think it’s appropriate [to exclude BP] in these circumstances,” said Mr. Bromwich, director of the Interior Department’s Bureau of Safety and Environmental Enforcement.
On Wednesday, the Interior Department issued its first set of citations related to the spill at the Deepwater Horizon rig, accusing BP and two of its contractors of breaking several rules. The citations are likely to carry fines.
Scheduled for Dec. 14 in New Orleans, the upcoming lease auction will involve leases in the western Gulf of Mexico. The leases cover about 21 million acres, in water depths of up to 11,000 feet. It will be the first lease auction since the Deepwater Horizon disaster. An explosion aboard the rig in April 2010 killed 11 people and caused 4.9 million barrels of oil to spill into the gulf.
The Interior Department said production on the available leases could reach 420 million barrels of oil and 2.7 trillion cubic feet of natural gas.
Earlier Thursday in London, BP announced a £4.5 billion ($7.09 billion) investment along with three other oil majors in the North Sea’s Clair field, as the British oil-and-gas producer boosts spending in its home market despite a tax increase on crude production earlier this year.
BP’s investment on its home turf comes as the company tries to get back on track after a number of high-profile setbacks that have constrained its ambitions in some overseas countries.
BP said the U.K. government has approved plans by it and partners Chevron Corp., ConocoPhillips and Royal Dutch Shell PLC to proceed with the second stage of its Clair Ridge project. BP’s share of the Clair field investment will be about £1.26 billion. Including Thursday’s announcement, BP, its Clair field partners and other companies plan to invest almost £10 billion in the North Sea over the next five years, the company said.
The decision to go ahead with the investment comes only months after the U.K. Treasury raised its top rate of tax on profits from North Sea production by 12 percentage points to 81%, a move that aroused intense opposition from the oil industry. Critics have said the increase risked crimping further spending in the region. However, an independent tax and government-spending watchdog, the Office for Budget Responsibility, has said the increase is unlikely to curb spending given high oil prices.
U.K. Prime Minister David Cameron, speaking at a press conference with BP Chief Executive Bob Dudley, said discussions between the government and the oil industry about taxation were continuing. Those talks are focusing on how best to encourage investment in fields that are only marginally profitable to develop, Mr. Cameron said.
The company said the new U.K. output would enable it to sustain a daily output of 200,000-250,000 barrels of oil equivalent a day until 2030.
Four BP-operated North Sea projects are part of a wave of new oil and gas developments around the world that the U.K. firm expects to come on stream over the next five years in countries such as Brazil and Angola, the company said.
The Clair field contains about seven billion barrels of oil in place and will be among those still operational in 2050, Mr. Dudley said. The second stage of its development will come on stream in 2016, he said.
Earlier this year, BP announced plans for the $4.7 billion redevelopment of the Schiehallion and Loyal fields, west of Shetland, and the $1.1 billion development of the Kinnoull field in the central North Sea. And its £550 million Devenick natural-gas project with RWE AG’s RWE Dea announced last year is already underway, with production expected by next year.
BP’s share price has lagged those of other integrated oil majors, largely owing to investor worries that company may pay huge liabilities related to the Deepwater Horizon disaster. The company is also confronting a stream of litigation related to a proposed venture with OAO Rosneft that fell through.
Royal Bank of Canada analyst Peter Hutton said that the economics of the Clair project from data provided a few month ago looked “surprisingly attractive.”
“I think BP should be spending where they can get attractive returns, and that still includes the U.K.,” he said.
Alexis Flynn contributed to this article.
(c) 2011 Dow Jones & Company, Inc.
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