The world’s biggest miner, which booked writedowns of $7.2bn against its US shale unit earlier this year, said recovering oil prices and efforts to lower costs are making investment opportunities more attractive.

BHP’s board will decide within six months on its investment in the BP operated Mad Dog 2 oil and gas project in the Gulf of Mexico, it said Wednesday. The company earlier flagged its share of the project at $2.5bn. Additional investments of as much as $2.5bn in existing project options are also being considered, said Steve Pastor, the producer’s petroleum operations president.

“While currently well supplied, underlying fundamentals suggest both oil and gas markets are improving more quickly than our minerals commodities,” he said. “Petroleum is well placed to maintain its position as BHP Billiton’s highest margin business and to grow its free cash flow contribution.”

Melbourne-based BHP’s petroleum unit has oil and gas assets in five nations including the United States and Australia. Over the past 15 years the unit has had an average margin for earnings before interest, taxes, depreciation and amortization of 64 per cent, compared with 54 per cent from iron ore, Macquarie Group analysts said.

The company said it struck oil at its Caicos deepwater exploration well in the Gulf of Mexico and plans to drill the nearby Wilding well in November, adding it is “optimistic” about commercial development in the area.

While US crude is trading at three-month highs around $50 a barrel, it remains short of $100 a barrel in 2011 when BHP first made its foray into the shale business. It acquired Chesapeake Energy’s Fayetteville assets for about $4.8bn and later that year completed a $12.1bn takeover of Petrohawk Energy.

Culled from The National Business.