Project success for major player

PyreneesBy Courtney Pearson

July, 6, 2015

BEGINNING production ahead of schedule was the first sign that BHP Billiton’s Pyrenees project would be one of the company’s most successful.

Pyrenees, which the company described as “world class”, produced its 92 millionth barrel of oil  less than five years after starting up.

The US$1.7 billion Pyrenees project produced 5.7 billion barrels of oil equivalent in the year to March 2015, a rise on the previous year’s 5.4bnbbl.

In May, BHP Billiton spun off its non-core assets into the newly-listed South32.

“A simpler portfolio, focused on our 19 core assets, will retain an optimal level of diversification while generating even stronger growth and margins,” BHP Billiton chief executive Andrew Mackenzie said.

One of the assets it retained was Pyrenees, which has been a core project for years.

It received approval  in 2007 and has been producing oil from the Crosby, Ravensworth and Stickle fields since 2010. The fields have estimated recoverable oil reserves of  between 80 million barrels and 120MMbbl.

In the nine months to March this year, the company stated that there had been “strong uptime performance” at the Pyrenees conventional oil project which was offset by field decline at the North West Shelf and industrial action at Bass Strait.

The project is now in full swing, with a 34 per cent rise in production in the second half of last year attributed to new production wells.

Pyrenees production licenses,  WA-42-L is held in joint venture between operator BHP Billiton (71.43 per cent) and Quadrant Energy (28.57 per cent), after Apache Corporation completed the sale of its Australian assets in June. The second production license, WA-43-L, is a joint venture between operator BHP Billiton (40 per cent), Quadrant Energy (31.5 per cent) and INPEX (28.5 per cent).

The development is anchored in the Exmouth Sub-Basin off the north-west coast of WA.  At the time of the project  announcement, the area was described by BHP Billiton as “an emerging oil province in Australian waters”.

Pyrenees comprises 24 wells and a double-hulled floating production storage and offloading (FPSO) vessel, which can produce 96,000 barrels per day.

The facility produces crude oil from the Ravensworth, Crosby, Stickle, Tanglehead, Wild Bull and Moondyne reservoirs.

The development is near Macedon in WA-42-L – which delivers natural gas to the WA domestic gas market via the Dampier to Bunbury natural gas pipeline –  and Stybarrow, which is expected to reach the end of its life in the second half of this year.

In a testament to one of the company’s core assets and its history in the oil and gas industry, last year BHP Billiton signed an agreement with Pemex to exchange deepwater expertise, as a result of the company’s success with FPSOs, including the Pyrenees facility.

“We have proven we can build projects better and faster than most operators, and our offshore facilities have some of the highest operational uptimes and safety records anywhere in the world,” BHP Billiton petroleum and potash president Tim Cutt said.

The Pyrenees development is expected to be in production for 25 years.

Moving forward

BHP Billiton is one of Australia’s most successful global companies, paying the Australian Government nearly $23 billion in tax and royalties last year.

However, the company and the industry as a whole are experiencing a transition period in project development.

Despite recent falls in commodity prices, Mr Mackenzie said he was confident of the company’s future.

“The reductions in prices we face today are something our industry and country has seen many times before and while this operating environment tests us, I am optimistic for the future,” he said.
“With each cycle, demand is greater than the previous one – and continues to rise.”

BHP Billiton recently simplified its portfolio from 41 to 19 assets through the demerger of South32.

“Over the past three years, we have completed more than US$6.5 billion of targeted divestments to simplify our portfolio,” BHP Billiton chairman Jac Nasser said.

“After extensive consideration, we believe the demerger is likely to create more value than other alternatives, including asset sales.”

BHP Billiton is continuing to cut expenditure and increase its cost-effectiveness in its petroleum business.

Mr Cutt said that while the company could not control the market, it could control its own operational behaviour.

“BHP Billiton has a strong focus on productivity and our petroleum business is no exception,” he said.

“In our shale operations, for example, we have lowered our drilling expenditure by 50 per cent.”

BHP Billiton reported a 9 per cent rise in group production for the nine months to March this year “with records achieved for 10 operations and five commodities”.

The company planned to deliver 16 per cent of group production growth by the end of the 2015 financial year. By the same time, BHP Billiton’s petroleum business was expected to produce 255 million barrels of oil equivalent – a 5 per cent increase on the 2014 financial year.

Mr Cutt said BHP Billiton had a “positive outlook” for its operations in the US, as well as for exploration in Trinidad and Tobago.