BP, Inc. (NYSE: BP) has made a strategic decision to increase production from its Gulf of Mexico properties and will invest billions to accomplish this over the next decade.

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BP is currently the largest leaseholder in the Gulf of Mexico with interests in more than 350 leases. Surprisingly, the number two leaseholder is Anadarko Petroleum (NYSE:APC), a smaller independent exploration and production company, with just over 300 leases.
BP already has production of more than 400,000 BOE per day from the Gulf of Mexico, with nine major projects under development, and interests in 22 producing fields.

Current Projects
One major project of BP is Thunder Horse. BP has eight producing wells at Thunder House, with a ninth well starting up in the first quarter of 2009. The field is currently producing at over 300,000 gross barrels oil equivalent (BOE) per day. BP has a 75% interest in Thunder Horse, with Exxon-Mobil (NYSE: XOM) owning the other 25%.

Another major Gulf of Mexico for BP is the Atlantis Development. This is a three-phase project, with the company in the middle of phase two. Atlantis has current capacity of 200,000 BOE per day, and was producing 140,000 BOE per day in the spring of 2009. BP has a 56% interest in Atlantis, and is partnering with BHP Billiton Ltd. (NYSE:BHP), which owns 44%.

Difficult Drilling
Another project that has huge potential for BP is Kaskida, located in the deepwater Gulf of Mexico. This discovery is testing the Lower Tertiary area of the Gulf of Mexico. BP discovered the field in early 2006, and just drilled a second test well that validated the western edge of the field as well. The company said that the original oil in place at Kaskida may be as much as $3 billion.

These are not easy wells to drill, as the second well was drilled in 5,675 feet of water, to a total depth of 32,500 feet. Production from Kaskida probably won't start until 2015.

Giant Discovery
A second Lower Tertiary discovery for BP was at Tiber, which was announced in September 2009. BP called Tiber a "giant oil discovery" in its press release announcing the project. Petrobras (NYSE: PBR) and ConocoPhillips (NYSE: COP) are partnering with BP on the field and have ownerships stakes of 20% and 18%, respectively of the Tiber project. BP still has to drill some further wells at Tiber before it can determine how commercial the field will be.

Bottom Line
BP is demonstrating in the Gulf of Mexico that with enough investment, it can increase production and offset the natural decline of its existing base. Others should follow its example and exploit the natural resources in the deep offshore Gulf of Mexico. (To learn more, see Oil And Gas Industry Primer.)

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