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Vol. 12, No. 4 Week of January 28, 2007
Providing coverage of Alaska and northern Canada's oil and gas industry

BP ‘ready to go’ on slope gas line

Alan Bailey

Petroleum News

BP America President and Chairman Bob Malone assured the Alaska Support Industry Alliance’s Jan. 19 Meet Alaska conference of BP’s commitment to Alaska, including heightened maintenance of existing oil facilities, the development of new petroleum resources and a continuing intent to participate in the construction of a natural gas pipeline from the North Slope.

“BP’s ready to go,” Malone said of the pipeline project, while expressing regret that the project had not moved forward in 2006.

“With each discussion about the North Slope gas resources we come closer to a plan that’s going to work for all parties,” Malone said. “The economic interests of the state are aligned with our interests. … We both want something that generates the most revenue possible. … That’s why it’s in our mutual interest to develop this line at lowest cost, most efficiently and with the most reliable system that we can possibly build.”

North Slope gas needs to compete successfully in an increasingly tough gas market, Malone said. He also commented on the enormous challenges inherent in the pipeline project, with an estimated cost of $25 billion and the use of between 5 million and 6 million tons of high-strength steel.

“The new (North Slope) gas treatment plant alone … would be the largest gas treatment plant in the world,” Malone said.

BP here to stay

Malone sought to dispel the latest rumor that BP was about to leave Alaska, saying that ever since BP arrived in the state and drilled its first well rumors have circulated about BP’s lack of commitment to the state.

“Our 50-year future in Alaska means we’re here to stay,” Malone said. “We have a very, very focused program of investments in the United States and we have a very focused program of investments here in Alaska. … Alaska is offering us one of the greatest opportunities and the greatest stability for investment anywhere in the world. … Alaska is the second largest known resource base in BP’s business, second only to Russia.”

Malone said that BP has already made a huge investment in the North Slope, the trans-Alaska pipeline and double-hulled oil tankers. Three decades after startup Prudhoe Bay remains the largest oil field in North America and one of the largest fields ever discovered; BP continues to pursue new ways to produce light oil from the field.

In addition to Prudhoe Bay, BP is advancing the Beaufort Sea Liberty project.

“The project is awaiting final approval and a dedicated team is continuing to move it forward,” Malone said.

Liberty will involve directional drilling to a reservoir as far as 8 miles from the surface drill site, thus enabling the development of offshore oil and gas resources from onshore locations.

“This will open up entirely new opportunities on the Slope,” Malone said.

Heavy oil

BP’s future in Alaska also includes the state’s untapped heavy oil resources.

“Current estimates are that there are 20 billion barrels of (heavy oil) resource, which is roughly the size of Prudhoe Bay,” Malone said.

The challenge is to find ways of developing this heavy oil in the arctic environment — BP is bringing its global expertise to bear on resolving the issues of heavy oil production, Malone said.

“We plan to drill a test well and install some facilities this year to begin looking at how to get … that heavy oil,” he said.

Integrity of facilities

Malone emphasized that, following BP’s problems over the past year at Prudhoe Bay, the company is focused on ensuring the integrity of the existing North Slope facilities.

“Our existing business is still the foundation,” Malone said. “With our partners we’re in the midst of a renewal effort to ensure the integrity of our core business here in Alaska. In Prudhoe Bay major maintenance will increase to $185 million in 2007, a nearly fourfold increase from 2004.”

And that is just part of BP’s commitment to learn from past mistakes, he said.

“You will see BP’s actions, not its words, as we move forward proudly, but understanding that we recognize the mistakes that have been made — we’re learning from them,” Malone said.

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