Chevron sanctions high-pressure Anchor project for deepwater US Gulf of Mexico

Highlights

First high pressure project for the US Gulf of Mexico

Facility design capacity of 75,000 b/d of crude and 28 MMcf/d of natural gas

First oil expected in 2024

New York —
Chevron said Thursday it would go ahead with its Anchor project in the Green Canyon area of the Gulf of Mexico, sanctioning the industry’s first deepwater high-pressure development.

Use of this new technology, which is able to handle pressures of 20,000 psi, opens the door to other high-pressure opportunities in the Gulf of Mexico for Chevron and other industry players, the company said in a statement.

“This decision reinforces Chevron’s commitment to the deepwater asset class,” said Jay Johnson, executive vice president of Chevron’s upstream segment.

“We expect to continue creating value for shareholders by delivering stand-alone development projects and sub-sea tie backs at a competitive cost,” he added

The Anchor Field is located in the Green Canyon area, approximately 140 miles off the coast of Louisiana, in water depths of approximately 5,000 feet.

Initial development costs are expected to be about $5.7 billion. Stage 1 development is expected to have seven-well subsea development and a semi-submersible floating production unit.

First oil is anticipated in 2024.

The planned facility has a design capacity of 75,000 b/d of crude and 28 MMcf/d of natural gas. Total recoverable reserves are estimated to exceed 440 million barrels.

Chevron is operator and holds a 62.86 % stake with TOTAL E&P USA holding a 37.14 % working interest.

GREEN CANYON LOCATION WILL FEED AMBERJACK, MARS PIPELINE SYSTEMS

The Anchor field is near Total’s Tahiti field, as well as Chevron’s Big Foot, St. Malo and Jack concessions all of which are served by Shell Midstream’s Amberjack pipeline.

Third quarter 2019 flows on the Amberjack system, which carries medium sour crudes like Poseidon and Southern Green Canyon, averaged 358,000 b/d, according to Shell Midstream company data.

Amberjack then feeds the Mars system, which Shell Midstream is looking to expand by 65,000 b/d due to increased demand for pipeline space. Mars pipeline capacity has been running at an average capacity over 90% in the 2019.

Third quarter 2019 flows on the Mars line were lower than normal at 519,000 b/d due in part to the production impact of Hurricane Barry. However, third quarter 2018 flows on the Mars system were at 580,000 b/d.

Crude flowing on the Amberjack and Mars systems gives easy access to the Louisiana Offshore Oil Port, presently the only terminal to load in one shot VLCCs used to carry crude across the global. It also will have easy access to Eastern Louisiana refineries.

The Energy Information Administration expects US Gulf of Mexico production to rise to an average 1.9 million b/d in 2019 and 2.0 million b/d in 2020, up from the 1.7 million b/d in 2018 as demand growth for medium sours like Mars is expected to grow. Asian refiners have been seen importing the crude and the widening of the sweet-sour spread has made Mars more competitively globally.

The price spread between front-month Mars and Light Louisiana Sweet is averaging $2.99/b so far in the fourth quarter as demand for light, lower sulfur crudes like LLS has risen ahead of the lower sulfur bunker specification which takes effect on January 1, 2020, as mandated by the International Maritime Organization.

However, on Tuesday Chevron said it would take a fourth-quarter one-time asset writedown of between $10 billion and $11 billion, due to a downward revision in the longer-term commodity outlook, with over half related to its shale assets in Appalachia. However, Big Foot was included in the writedown due to lower long-term crude price outlook. Chevron did not provide more details.

— Janet McGurty, janet.mcgurty@spglobal.com

— Edited by Debiprasad Nayak, newsdesk@spglobal.com