NEW YORK ( TheStreet) -- I was speaking to Stephanie Link about the incredible "Tubular Bells" offshore project from Hess (HES) and Chevron (CVX) , now coming online after three years of development. This project tells me a lot about very expensive deepwater projects in a new $75-per-barrel oil environment and whether now is the time to begin to bet on a stronger offshore cycle. I think the answer is no.
What is incredible about this Hess project is the time, money and jobs that were involved: Tubular Bells took three years to develop to first well spud (the initial part of the well-drilling process), cost an estimated $2.3 billion and created 7,000 jobs. It will ultimately deliver 50,000 barrels of oil a day equivalent when it reaches full production potential in the next six months.
These mega-projects are expensive and require very long-term commitment, so they do not respond to a very fast moving price for oil. Even if oil were to stay in a very low range of $65-$80 for several years, these projects are not easily scaled up or down. Hess and Chevron are banking on a return to higher oil prices in the future that will increase the average of prices during the life of the project.
Indeed, Hess indicated the start of development for an even bigger project recently, called Stampede. This project, being co-developed with Statoil (STO) will cost upwards of $6 billion and won't deliver its first drop of oil until 2018.