BBL BHP Group Plc

   By Rhiannon Hoyle 
 

SYDNEY--BHP Billiton Ltd. (BHP.AU) outlined plans to gradually expand its petroleum business, signaling new projects were becoming more attractive because of lower costs while forecasting prices for oil and gas to recover more quickly than other commodities it produces.

BHP said on Wednesday that rising oil demand, declining output from existing fields and a lack of major new projects, due to the downturn, is "expected to create a significant opportunity to invest" in the sector.

"While currently well supplied, underlying fundamentals suggest both oil and gas markets are improving more quickly than our minerals commodities," said BHP petroleum operations president Steve Pastor. "Our focus on productivity has significantly reduced both operating and capital costs, supporting a range of shale and conventional investment opportunities that would generate compelling returns at today's prices."

That includes the Mad Dog II deep-water project in the Gulf of Mexico, on which it forecast an investment decision would be made in the next six months. BHP has a 24% stake in Mad Dog, which is 61% controlled by BP. Chevron owns the remaining stake.

Early in the year, oil prices slipped below US$30 a barrel for the first time in more than a decade -- down from more than US$100 as recently as 2014 because of a global glut. Prices have since sprung back to roughly US$50 a barrel.

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com

(END) Dow Jones Newswires

October 05, 2016 02:14 ET (06:14 GMT)

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