For the past month, market chatter had expected the award to go to Subsea 7 over TechnipFMC.Mad Dog 2 is about 190 miles (305 kilometres) south of New Orleans.
The value of the engineering, procurement, construction and installation (EPCI) contract is thought to be at the top end of Subsea 7’s stated range of between $300m and $500m, according to analysts at Pareto Securities.
Analysts at Arctic Securities say they had expected the value to be around $700m. Both sets of analysts believe Subsea 7’s margin is likely to be tight, given the fierce competition in the sector.
For the struggling subsea sector, the contract is said to be one of the few large-scale projects in the pipeline.
BP’s overall capital expenditure (capex) for Mad Dog 2 is estimated at close to $9bn. The oil major had delayed the project in 2013 with estimated capex at close to $20bn. The huge cost reduction is said to be largely related to project simplification.
For Subsea 7’s part, the integrated EPCI contract covers subsea umbilicals, risers and flowlines, as well as related subsea equipment. OneSubsea is supplying subsea production systems in a separate contract thought to be worth about $600m.
Subsea 7 used its partnership with Schlumberger’s OneSubsea to cut costs, with such alliances between oil service companies now commonplace in the sector.
“This project serves as a step change of how we work in the region and in Subsea 7’s ability to deliver superior value to the industry,” said Craig Broussard, Subsea 7’s vice-president for the US Gulf of Mexico.
Offshore installation at Mad Dog 2 is scheduled for 2019 and 2020.
