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Vol. 18, No. 8 Week of February 24, 2013
Providing coverage of Alaska and northern Canada's oil and gas industry

Resetting Liberty

BP Alaska now aims to begin production from offshore field by end of 2020

Wesley Loy

For Petroleum News

BP, with the blessing of federal regulators, is hitting the reset button on its stalled offshore Liberty project.

The Interior Department’s Bureau of Safety and Environmental Enforcement, or BSEE, has given BP Exploration (Alaska) Inc. two years to submit a new development and production plan for Liberty.

The company is now shooting to start production from Liberty by December 2020, a BSEE letter indicates.

Originally, BP had hoped to have oil flowing in 2011.

Liberty is located in shallow water, about 20 feet deep, in the Beaufort Sea about six miles offshore and 15 miles east of Prudhoe Bay. BP has estimated the field, discovered in 1997, holds more than 100 million barrels of recoverable oil.

Getting at the oil has proven a challenge.

BP had been working on an ambitious and technically daunting plan to drill into the reservoir from the neighboring Endicott field. Parker Drilling Co. built a monster rig for boring ultra extended-reach wells, and the rig components were barged to the North Slope in July 2009.

The rig was erected, but never went to work.

BSEE, with a Dec. 31 letter signed by Alaska regional director Mark Fesmire, granted BP a suspension of production on Liberty unit leases OCS Y-1585 and Y-1650. The effect of the action is to extend the leases.

The agency made the decision after reviewing BP’s Nov. 20 suspension request and revised plan of operation.

BSEE made reference to the “final design, fabrication and construction” necessary to achieve Liberty production by December 2020. But the two-page letter didn’t specify exactly what sort of development BP now has in mind to tap the field.

Fesmire’s letter said BP wanted “an unreasonably long period of time” to submit a new development and production plan.

The agency determined two years would be enough time. And so, BSEE gave BP a deadline of Dec. 31, 2014.

BP will need to provide progress reports every three months on its efforts to develop the plan, the letter said.

Once the plan is in, BSEE’s sister agency, the Bureau of Ocean Energy Management, will conduct a regulatory review and prepare National Environmental Policy Act documents. Then BOEM will issue a “record of decision” on whatever BP proposes.

Gulf disaster, rig trouble

Exactly how to access the offshore Liberty field has been the subject of much thought.

The initial idea was to build a gravel island at Liberty with production facilities and a buried subsea pipeline to carry the oil ashore. That’s what BP did for its Northstar field, which sits in federal and state waters northwest of Prudhoe Bay.

BP’s Endicott field also runs on an island, but a causeway connects it to land.

Ultimately, BP chose to develop Liberty by drilling from a satellite island built onto the Endicott installation.

This approach offers advantages, such as reducing Liberty’s footprint and avoiding potential impacts to bowhead whales important to Native subsistence hunters. From a practical standpoint, Liberty oil could be produced using the existing facilities, pipeline and road access at Endicott.

BP said the planned Liberty wells would be technological marvels. The wells would go down two miles and bend out horizontally for six to eight miles to tap the reservoir, making them among the longest extended-reach wells ever attempted.

But the Liberty project hit turbulence that never allowed it to get off the ground.

BP’s Deepwater Horizon blowout in the Gulf of Mexico in April 2010 prompted the Obama administration to impose a temporary moratorium on deepwater drilling, and on exploratory drilling in the Arctic.

Although Liberty was exempted from the moratorium because the drilling would be done from the Endicott satellite island, close to shore, the project nevertheless drew increased scrutiny.

U.S. Sen. Frank Lautenberg, D-N.J., called for a halt to Liberty.

“In an attempt to escape federal regulation of offshore drilling, BP has built an artificial island in the Beaufort Sea and claimed its project is therefore being carried out ‘onshore,’” Lautenberg said in a June 24, 2010, letter to the Obama administration.

BP also encountered problems with the Liberty drilling rig. In November 2010, BP said it was suspending the Liberty project, saying the rig needed an engineering review. Parker, in a filing with the U.S. Securities and Exchange Commission, said the review would include the rig’s safety systems.

After the review, BP said the rig needed substantial modifications to its mud, hydraulics, pipe handling, heating and other systems. The company also said it believed the project costs would be at least double the original $1.5 billion estimate, and “it would take several more years before drilling could commence.”

Concept selection

BP, however, stopped short of saying Liberty was dead.

Damian Bilbao, head of finance for BP Alaska, touched on Liberty during a Feb. 8 hearing of the state Senate Resources Committee.

“Has Liberty been canceled or set aside for a brief period of time or where are we on Liberty?” asked Sen. Peter Micciche, R-Soldotna.

Bilbao said BP had received the suspension of production from the federal government, and said Liberty “is still an attractive project that competes globally for capital.”

BP Alaska spokeswoman Dawn Patience said the two-year suspension period would give the company time to identify potential development options for the Liberty unit.

“BP remains committed to the development of this resource for the benefit of Alaskans and U.S. energy security,” she said.

What might the refocused project look like?

“Our concept selection process has been initiated,” Patience said. “However, it may be a year or more before we determine the specifics regarding a development concept. During the initial project planning for Liberty, BP examined an island connected to land by a subsea pipeline similar to the Northstar design. We have successfully constructed and operated the Endicott and Northstar production islands.”

And what will become of the behemoth Liberty rig?

“We are currently working to determine the best use for the rig,” Patience said, noting it’s still standing on the Endicott satellite drilling island.

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