Mad Dog, BP Plc’s drilling project deep in the Gulf of Mexico, could be Exhibit A in the oil industry’s war on cost.
When the British oil giant announced the project’s second phase in 2011, it put the price at $20 billion. Last month, after simplifying plans and benefiting from a sharp drop in everything from steel to drilling services, Chief Executive Officer Bob Dudley said he could do the job for $9 billion.
Across the industry, companies have taken a chainsaw to expenses, slashing spending for the 2015-to-2020 period by $1 trillion through cutting staff, delaying projects, changing drilling techniques and squeezing outside contractors, according to consulting firm Wood Mackenzie Ltd. That’s cushioned businesses as oil prices plunged 60 percent since 2014. Now producers seek to show they can make the savings stick, while service providers try to reverse their losses.