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Vol. 15, No. 49 Week of December 05, 2010
Providing coverage of Alaska and northern Canada's oil and gas industry

BP takes timeout for Liberty rig review; will mean 100 fewer jobs

BP is taking a timeout on its Beaufort Sea Liberty project in order to address design and engineering of the huge land-based rig it had Parker Drilling fabricate for Liberty’s ultra-extended-reach drilling program.

Steve Rinehart, BP’s Alaska spokesman, told Petroleum News Nov. 30 that BP is going to “suspend construction on the rig itself for a period of time,” and described much of what will be done as “a thorough engineering review.”

He said resources are being shifted “from construction work to the engineering review. This will mean some of our contract workers are redeployed while others may not be needed until a later phase.”

“In the short term, we estimate a reduction of about 100 project jobs. Some personnel in those jobs may be redeployed,” Rinehart said.

BP Exploration Alaska President John Minge told the Resource Development Council’s annual conference in November that the company expects to spend roughly $800 million on capital projects next year and has $1.3 billion budgeted for operating costs, with the capital budget split roughly in thirds: “a third going to safety and operations integrity, a third to sustain the base which offsets and mitigates decline, and a third for growth, which is primarily Liberty.”

Rinehart said he couldn’t address potential budget impacts, but said BP is “evaluating all aspects of the project to ensure the design, systems and materials are right. So there is a lot of work to do.”

Moving ahead deliberately

Rinehart said the action was not a decision to stop the project but “a decision to move ahead deliberately. We’re going to take a timeout on the physical construction of the rig. We want to review some of the design and engineering elements of the rig, which is the first of its kind. There has never been a rig quite like this, and as we worked to assemble it, since off-loading it in the summer of ’09 … some design and engineering issues have arisen and we have decided the smartest and safest way to deal with those is to take a timeout on engineering and design.”

He said much of the work that will be done will be a “thorough engineering review,” including “a review of all safety critical systems — such as the power, high pressure mud and HVAC systems — to ensure they meet our high standards.”

Rinehart said BP’s “review will include applying what we have learned from the Deepwater Horizon incident.”

Status quo on earlier delay

The decision, he said, was not directly related to an earlier delay in drilling from late in 2011 to “likely” sometime in 2012, announced by BP in July in response to statements by federal and state agencies that they would seek an environmental and safety review of Liberty.

In referring to the July decision, Rinehart said BP still “anticipates” that there will be some state and federal regulatory changes.

“Certainly … it has been clear that regulatory agencies want to take a closer look, and we’re all for that. We’re making time for that,” he said, noting that situation was “status quo.”

BP does not yet have an estimated start date for drilling. Rinehart said its “priority is to develop this project safely and carefully and we’re going to take the time to do that right. As work progresses we’ll get a clearer idea of what our development schedule looks like.”

The 100 million barrel Liberty field is in the Beaufort Sea, some 15 miles east of Prudhoe Bay and the Liberty drilling rig is on an extension — completed last year — of the existing Endicott satellite drilling island.

Liberty was discovered in 1997 and the original development plan was to duplicate what was done at Northstar, another field offshore in the shallow waters of the Beaufort Sea. Northstar was developed from an offshore drilling island and the oil is sent to shore in a buried subsea pipeline.

The plan BP ultimately settled on, however, uses ultra-extended reach wells drilled from Endicott, some eight miles west of Liberty.

—Kay Cashman & Kristen Nelson

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