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BP continues to look for synergies at greater Prudhoe Bay Operating and maintenance budget drops $40 million for 2001; capital expenditures budget up $125 million Kristen Nelson PNA Editor-in-Chief
BP Exploration (Alaska) Inc. continues to look for savings in the consolidation under one operator of the east and west operating areas at Prudhoe Bay, Niakuk, Point McIntyre, Lisburne and the western Prudhoe satellites.
“With alignment our goal is to get to a point where we actually have an integrated set of facilities and people across what would become then the greater Prudhoe Bay… the initial participating area of Prudhoe, the greater Point McIntyre area properties and the western satellites that are being developed currently,” Neil McCleary, BP Exploration (Alaska)’s greater Prudhoe Bay business unit leader, told PNA July 17.
Prior to last year, BP and ARCO Alaska Inc. each operated half of Prudhoe and ARCO operated the greater Point McIntyre area — Lisburne, Niakuk and Point McIntyre — whose production was processed at the Lisburne production center.
With the consolidation of the eastern and western operating areas at Prudhoe Bay with BP as operator there was a reduction of something like 180 positions between the ARCO and BP head counts, said BP Exploration (Alaska) spokesman Ronnie Chappell.
The consolidation process isn’t complete, although McCleary said “the big chunky pieces of business” are done. “And now we get to that huge basket of best practices, best processes, best decision…” McCleary said he didn’t want to predict what the success will be or what the limitation is, “because I think it’s boundless.
“And just freeing up the organization to be able to seek out those best processes is going to reduce our cost, but improve our efficiency, well into the years to come. And we’re not going to find it in any individual year. It’s going to be a continual process of improvement.”
Chappell said combining the operations at Prudhoe Bay was done while continuing to move oil — and while improving safety performance.
There have been two days-away-from-work cases this year, McCleary said, but before a lost-time accident occurred, the field set a new safety record.
“We actually exceeded 3 million working hours without a days-away-from-work case, which is the first time that we can demonstrate at the greater Prudhoe Bay area that we’ve actually achieved that.” Economic alignment the goal The greater Prudhoe Bay area alignment gives each owner equal interests in oil and gas at Prudhoe, and equal interests in the satellites and in what was formerly called the greater Point McIntyre area.
“We say it’s from tundra to bedrock,” McCleary said.
“So all horizons. All depths. All complexities of different oil, different structures etc. in a common set of interests.
“And that’s a freeing process, because it frees everybody up to have a common set of economic criteria by which to develop.”
The alignment is not yet complete, McCleary said. BP, Phillips Alaska Inc., ExxonMobil and Forest Oil Corp. have signed on — about 98 percent of the working interest ownership.
“But it’s kind of like the last house on the block when you build a development — you’ve got to get the last house on the block to agree,” he said. In this case the last house belongs to Chevron and Texaco, and Chevron is in the process of acquiring Texaco.
Development drilling continues without 100 percent alignment, and McCleary said there is a rig now on L pad for development of the Borealis-Polaris satellite area, with two rigs designated to satellite work. There is also a rig working in the initial participating area at Prudhoe. A well was drilled at Niakuk last winter, the first well there in four years, and the drilling program will continue there next winter. There are drilling restrictions at Niakuk because the pad is on the coast and the state has prohibited drilling during the open-water season.
Both drilling at Niakuk and planned work at Milne Point will test ultra extended reach drilling, McCleary said. BP has set world records for extended reach drilling at Wytch Farm in England.
“We are working actively to import that technology for … penetrating that next barrier of extended reach to ultra-extended reach,” he said. Some work awaits alignment While development drilling is proceeding, there is a project on hold awaiting 100 percent approval, which requires full alignment. That project, McCleary said, is called water wheel and addresses the problem of excess water-handling capacity at some gathering centers while others, particularly Lisburne, are limited by water handling capacity. Water wheel will direct flows to take advantage of excess water-handling capacity where it exists to optimize the entire greater Prudhoe Bay area, he said.
McCleary didn’t have a time frame for completing alignment, but said BP and its co-owners are working diligently to get to alignment.
This year’s budget, he said, has just been approved because the alignment which took place last year was only completed in the fourth quarter. Typically the operator goes into a calendar year with a budget approved by the co-owners, each of whom has an opportunity to submit a budget. Because of the change in operatorship and resulting synergies, the budget cycle for 2001 was protracted. This year budget agreement didn’t come until a couple of months ago, McCleary said, and now “we’re matching the activity level to the budget to make sure that we deliver what the partners have approved in terms of our budget.” The operating and maintenance budget for the greater Prudhoe Bay area for 2000 — the sum of the two operating areas and greater Point McIntyre — was $411 million in 2000 and dropped to $375 million for 2001.
The reduction in the operating and maintenance budget reflects savings expected from consolidation in operations.
“We are out there working to achieve the efficiencies and cost savings expected to be delivered by the move from two operators to one,” said BP Exploration (Alaska) spokesman Ronnie Chappell. 2002 budget now under discussion McCleary said BP’s priority within the operating and maintenance budget is on safety and mechanical integrity, followed by well work. Asked about interests of different owners in different parts of the budget, McCleary said “BP’s brand and brand values are core to our operatorship, so we’ll follow up with being a performance-driven, progressive, innovative and green company. … And so we’ll lead the way with the other co-owners to achieve those brand values.”
“We’ve got easily 30 more years of just the oil field side of the business and of course we’re finally on the verge here of seeing natural gas potentially sold to local or Lower 48 markets and that provides even another generation of options at Prudhoe,” McCleary said.
“It’s a valuable asset to everyone who’s involved,” said Chappell.
McCleary said the co-owners are now starting work on the 2002 budget process, starting with safety and mechanical integrity items, with what major equipment needs to be overhauled, with the corrosion inspection program and with what well work will be done.
He said BP expects that the budget process for 2002 will go more smoothly, and that a budget will be in place going into the year. Capital budget has grown While the 2001 operating and maintenance budget for the greater Prudhoe Bay area was down from 2000, the capital budget was up, with $425 million set for capital projects in 2001 compared to $300 million in 2000. That increase, McCleary said, reflects “the economic viability and the common economic interests of the co-owners.”
The alignment of oil and gas interests “makes all of the business decisions a common economic model,” he said, and … “gives us a common foundation to approve projects.”
The projects under the capital budget include construction, such as pipelines put in over the winter to link the satellites, as well as modules and manifolds needed for the satellites.
New grass roots drilling and side tracks to new locations are also in the capital budget. The big dollar amounts for 2001, McCleary said, “are the satellite expenditures, the capital drilling expenditure and the capital side track expenditures.”
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