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Vol. 19, No. 33 Week of August 17, 2014
Providing coverage of Alaska and northern Canada's oil and gas industry

Whither BP’s behemoth?

As company works up new Liberty development plan, big rig remains sidelined

Wesley Loy

For Petroleum News

It’s been five years since BP shipped a gigantic, specially designed drilling rig to Alaska’s North Slope to develop the offshore Liberty oil field.

But the rig has yet to drill a well. It’s just sitting there.

Exactly what BP plans to do with the behemoth, constructed by Parker Drilling Co., remains to be seen.

But one thing seems apparent - it won’t be used for the Liberty project.

BP has indicated as much in correspondence this year with the federal Bureau of Ocean Energy Management.

The company faces a Dec. 31 deadline to submit a revamped development and production plan for Liberty, which sits on two outer continental shelf leases.

The new plan “will not utilize” the Parker-built rig, said a May 7 letter from BP to BOEM.

$1 billion writedown

Parker Drilling fabricated the rig for BP at Vancouver, Washington, at a cost of hundreds of millions of dollars. The rig components arrived by barge on the North Slope in July 2009.

The rig stands on a drilling pad near the Endicott field. Liberty is to the east, about six miles offshore in the Beaufort Sea.

The plan was to use the rig to drill superwells from shore to tap the Liberty reservoir. BP said these would be some of the longest extended-reach wells ever attempted, going down two miles and then bending out horizontally for six to eight miles.

But the drilling never commenced.

In November 2010, BP made the decision to pause on-site assembly of the Liberty rig to conduct an engineering review of the rig design, materials and key systems.

It was determined, according to BP’s 2012 annual report filed with the U.S. Securities and Exchange Commission, that the rig “would require significant changes and investment in order to meet BP standards, and that these were not viable.”

In June 2012, BP suspended the Liberty project. It was a costly decision, resulting in a nearly $1 billion impairment loss.

Old plan scrapped

BP drilled and tested the Liberty No. 1 well in early 1997. The company subsequently announced a commercial discovery estimated at more than 100 million barrels of recoverable oil.

On April 22, BP announced a deal to sell a number of its North Slope properties to Hilcorp, including a 50 percent stake in Liberty.

BP is retaining responsibility for submitting the new Liberty development plan to federal officials.

The plan no longer involves drilling extended-reach wells from the Endicott area. Rather, BP is expected to propose a more conventional development that will involve building an artificial island in the Liberty field, with a subsea pipeline to carry the oil ashore.

The main purpose of BP’s May 7 letter to BOEM was to request withdrawal of the original Liberty development plan, which the old Minerals Management Service approved in 2008. The plan carried certain ongoing compliance obligations for BP.

In a July 24 reply to BP, a BOEM official said the agency would consider the 2008 development plan closed.

The new Liberty plan, due by year’s end, will replace the 2008 plan.

BP Alaska spokeswoman Dawn Patience told Petroleum News the fate of the extended-reach drilling rig, which belongs to BP and not Parker, remains undetermined.



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