January 07, 1999 --- Vol. 5, No. 2January 1999

Northstar fabrication suspended for a year due to low oil prices

BP Exploration (Alaska) Inc. said today that it began ice road construction for the Northstar project two days ago, but is suspending module fabrication work in Anchorage for one year due to low oil prices.

"We are committed to the Northstar project and still wish to develop Northstar," Octavio Pastrana, head of BP's eastern North Slope business unit, said in a statement. "We plan to begin gravel placement for island construction later this winter, pending receipt of necessary federal and state permits.

"However, continuing low oil prices require that we slow the pace of Northstar development, and module fabrication work is being suspended for one year," Pastrana said.

BP spokesman Paul Laird told PNA that BP has been spending an average of half a million dollars a day on Northstar since the resumption of fabrication work this fall. Spending will be reduced to about $350,000 a day by suspending fabrication work. "We need to show down the pace of development in order to reduce our overall spending," Laird said.

Alaska Interstate Construction Co. is building the eight mile ice road. It will be used to transport gravel to expand Seal Island to five acres and to provide logistical support for construction.

BP has a 98 percent interest in Northstar and is field operator. Murphy Exploration & Production Co. holds the remaining 2 percent interest.

Tyonek Deep delayed by low oil prices

Phillips Petroleum Co. said Jan. 6 that it is taking a $71 million write off for costs associated with the Tyonek Deep prospect in Alaska.

But, Phillips' spokeswoman Kristi DesJardais told PNA, the project has not been canceled. "We're just going to wait on oil prices to improve in order to commercialize the project," she said Jan. 6.

Jim Konst, Phillips' Alaska operations manager, told PNA that drilling is complete at the Tyonek Deep prospect. Phillips has been working on three Tyonek Deep wells.

"We've finished our testing of the B-1 sidetrack," he said. "We have tested two wells and run completion tubing in the third well that we've identified for the project. They're essentially ready for production."

Konst said the company is still evaluating the reservoir and how to make a viable project out of it. "It isn't viable under today's conditions," he said, "but we are still working on making it a viable project." He said that the write off occurred essentially due to low oil prices.

Phillips said that it expects a loss of 1,400 jobs worldwide as it takes "steps to reduce costs and increase available cash flow in 1999."

Konst said that Phillips will be making operation cost reductions to improve the profitability of Alaska operations, but said there wasn't an immediate impact in the state. Alaska, he said, is still viewed as a growth area for the company.

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