Addressing a presentation for journalists, analysts and investors, Aiken said BHP’s oil production fell 20% in the September quarter and the company was now spending more than $2.2 billion on building new oil and gas projects to reverse declining production from older fields.

The Gulf was expected to soon become a third major production hub for BHP, ranking alongside Bass Strait and the North West Shelf in importance.

“For us the Gulf of Mexico deepwater is a very important new core business for BHP Billiton,” Aiken said. “By [2008] a very large percentage of our production will be from the Gulf.”

He said BHP Billiton’s Mad Dog and Atlantis developments were on track, and the Shenzi and Neptune fields had been appraised as having enormous reserves. There had also been discoveries at Puma and Starlifter and BHP had strengthened its acreage position in the Gulf.

The company would boost investment in the Atlantis field by $100 million to $1.2 billion, with daily output expected to rise by a third when production started in 2006, according to Aiken. The company has also spent $368 million on the Mad Dog project, which is starting production by the end of this month.

Production at the $2.5 billion Atlantis field, in which BHP has a 44% interest, will rise to 200,000 barrels of oil a day, up from an earlier estimate of 150,000 barrels, Aiken said.

Capacity at the $1.54 billion Mad Dog project – in which BHP has a 23.9% stake – has also been increased by 25 percent to 100,000 barrels a day. Both fields are operated by BP.

BHP's Gulf of Mexico projects will help it reach output targets of between 170 and 175 million barrels by 2007, with the company planning to raise output further, Aiken said.

Of the $300 million to be spent on exploration for the year ending June 30, 67% will be spent in the Gulf of Mexico, the company said. BHP will also increase exploration spending in South Africa and off the coast of Canada, Bell said.