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Vol. 12, No. 31 Week of August 05, 2007
Providing coverage of Alaska and northern Canada's oil and gas industry

Oil Patch Insider

Oil sands grind down doubter BP; Alaska exploration buzz baseless, says BP; Palin calls PPT special session

BP likes spreading the message that its initials stand for Beyond Petroleum.

How about Behind our Peers?

Well, that was the case until this year when the global supermajor decided to clamber aboard the oil sands wagon.

In its highly regarded yearly Statistical Review of World Energy, BP credited the Canadian oil sands with holding 163.5 billion barrels of undeveloped reserves, representing oil that could be produced using current technologies in today’s economy.

It also lists separately 10.3 billion barrels of reserves that are now under active development.

That represents a sizeable chunk of BP’s estimate of 1.37 trillion barrels of worldwide reserves.

It also brings BP into line with others who have recognized the oil, including the U.S. Department of Energy, Cambridge Energy Research Associates and the International Monetary Fund.

But BP remained the most significant holdout, despite more than C$125 billion of planned investment and predictions of output tripling to 3 million barrels per day over the next decade.

The company weakened in the face of mounting evidence from the Alberta Energy and Utilities Board, which lists the recoverable resources from the oil sands at 178.7 billion barrels.

A company spokesman said the BP standard is not how much oil is buried in the sands, but whether it can be economically produced.

Having sold the bulk of its oil assets to Canadian Natural Resources in the 1990s, BP is left with only some deeply buried deposits in the Athabasca oil sands region of Alberta.

However, the company has plans to invest heavily in modifications to its Whiting, Ind., refinery to process heavy oil from Alberta.

That raises the possibility of BP following the lead of EnCana and ConocoPhillips by forming a joint venture with an oil sands producer to take a stake in both the upstream and downstream sectors.

—Gary Park

Business as usual for BP in Alaska, exploration rumors just that — rumors

An internal seminar about the oil and gas potential of the Arctic, hosted recently in Girdwood by BP’s Alaska exploration staff of one (Sandy Phillips) has sparked speculation that BP is considering resuming an exploration program in the state; speculation, the company says, that has no foundation in reality.

Admitting there has been no official word from BP, a reliable Petroleum News source within BP said in mid-July, Tony “Hayward, who’s taken John Browne’s place as CEO of BP, comes from the exploration side of the company. And the man who took Hayward’s place as head of BP E&P, Andy Inglis, was deputy chief of E&P and part of the company’s executive team. There’s been no official word that things will change in Alaska, but it only stands to reason London will review the possibility. The company needs reserves. … And then Sandy Phillips pulls in top geologists from around the world for this Arctic seminar, well, it makes one wonder.”

Up until Inglis stepped into Hayward’s shoes in February, he was responsible for BP’s growth areas, including Azerbaijan, Angola, Algeria, the deepwater Gulf of Mexico, Egypt, Trinidad and the Asia-Pacific region. He only worked in Alaska once, from 1994 to 1996, as manager of the company’s interest in the Kuparuk River field.

BP spokesman in Alaska, Daren Beaudo, says BP’s focus and strategy for its business in Alaska hasn’t changed.

“We are focused on four things: manage the light oil decline, accelerate renewal of the North Slope infrastructure, unlock heavy oil, and bridge to gas,” he told Petroleum News July 30.

As for Sandy Phillips and her meeting in Girdwood, Beaudo said, “Sandy is a staff of one, responsible for anything to do with BP exploration in Alaska — since I’ve been here, December 2002, at least. We still have a few exploration-tagged interests and she has responsibility for those. … But at this time we do not have any plans to become any more involved in Alaska exploration.”

In regard to the Girdwood seminar, he said, “We have many technical disciplines in BP that have global networks attached to them. The purpose of these networks is to share information and identify and take advantage of synergies. As such, Alaska still remains connected with the broader parts of the BP Group and will from time to time host events/clinics and seminars on subject matters ranging from peripheral to core.”

BP disbanded its 30-35 person exploration unit in Alaska in late 2001 after drilling its Trailblazer prospect in the National Petroleum Reserve-Alaska, which it then sold along with most of its Alaska exploration acreage.

The main BP exploration acreage that Phillips oversees in Alaska is in the 1002 area of the Arctic National Wildlife Refuge, which is closed to oil and gas exploration and development. The company also has a lease with ConocoPhillips and ExxonMobil north of Duck Island and one lease between the Milne Point and Prudhoe Bay units. According to Beaudo, BP also has a couple of small leases the company “picked up in last two years immediately adjacent to Liberty (Beaufort Sea prospect moving toward development) as a way to buffer our position there.”

—Kay Cashman

Palin calls special session of Alaska Legislature to review new Petroleum Profits Tax

Alaska Gov. Sarah Palin said Aug. 2 that she will announce details of a special session of the Alaska Legislature relating to the Petroleum Profits Tax at a press conference Aug. 3.

The Legislature passed the new tax last August. The state’s petroleum production tax was formerly a tax on the gross; the PPT is a tax on the net. The PPT was proposed by the administration of former Gov. Frank Murkowski as a companion to the gas pipeline contract which Murkowski negotiated with the North Slope gas owners, BP, ConocoPhillips and ExxonMobil.

The gas pipeline contract failed to receive legislative approval, but the tax passed, although at a higher rate than that proposed by Murkowski.

There have been concerns about the state’s ability to audit costs which oil and gas producers deduct under PPT as well as concerns about ethics issues surrounding the battle over the bill. Three legislators who voted on PPT have been arrested and accused of ethics violations involving an oil industry service company.

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