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NEWS BULLETIN

June 13, 2003 --- Vol. 9, No. 60June 2003

State approves BP’s request to mothball Badami for two years

The state of Alaska has approved BP Exploration (Alaska)’s application to suspend production from BP’s eastern North Slope Badami unit and mothball the unit’s facilities for a two year period beginning Aug. 1 and ending June 30, 2005.

In paperwork filed in mid-May as part of its fifth plan of development for Badami, BP said the field’s 1,350 barrel-per-day production rate “cannot offset field operating costs … making it uneconomical to continue operations.” (See related stories in the March 2 and March 9 editions of Petroleum News.) The company said at $24.72 per barrel oil — the “average oil destination value” in 2002 — its estimated annual cash loss would exceed $1.6 million.

Field production, which has been steadily dropping each year, is expected to continue to decline, BP said.

“We will continue to evaluate various options for Badami. The two-year suspension will give us time to do that,” BP spokesman Daren Beaudo told Petroleum News June 13.

The paperwork BP submitted to the state said several options for Badami had been identified, including selling it to a third party, hosting BP’s proposed offshore Liberty development or use by the Point Thomson project.

When Badami was initially brought on-line in September 1997, it was expected to hold 120 million barrels of recoverable reserves and produce 35,000 bpd. Production peaked “very briefly” at 18,000 bpd in 1998, BP told the state, citing problems with the reservoir which proved to be “more highly compartmentalized than originally thought.”

The Badami field has seven production wells, six of which are currently producing, two gas injection wells and one disposal well. BP said gross field construction and development cost was approximately $300 million.

‘Umiat Hilton’ back in business

Mike Tolbert, president of Umiat Commercial Co., told Petroleum News June 13 that the ‘Umiat Hilton’ (no connection to the Hilton Hotel chain) is back in business thanks to an agreement with PGS Onshore to use PGS’s sleeper and kitchen facilities on the other side of the Umiat airstrip.

The Umiat lodge’s sleeper and kitchen facilities were destroyed by fire June 10.

“Our phones will be up shortly, but otherwise we are totally up and running,” Tolbert said. “We can house and feed our guests at the PGS camp,” which “they pulled in there this spring.”

Tolbert said the lodge’s fueling depot was intact and all the generators had been salvaged.

“Our intention is to rebuild,” he said.

Umiat is a small community about 150 miles southeast of Barrow on Alaska’s North Slope. The lodge is a popular spot for oilfield exploration crews.

About 20 people were staying at the lodge but no one was hurt.

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