What will it take to get BP’s focus back on Alaska?

Kay Cashman

With competition tight within the company for investment dollars — and other places in the world offering better exploration and development opportunities — BP has shut down frontier exploration in Alaska and switched to harvest mode. (See story on page 11)

The man who heads up BP Exploration (Alaska) Inc.’s now defunct exploration department told PNA the company is focusing its exploration and development dollars on prospects in the Gulf of Mexico, Trinidad and West Africa.

In a Nov. 21 interview, F.X. O’Keefe talked about what it would take to get BP’s attention once again focused on Alaska.

The ability to “find and develop projects in a time period that is competitive” with other oil and gas provinces was his answer.

And what in Alaska is preventing BP from doing that now?

“A highly developed regulatory climate and the cost to develop a barrel of oil in Alaska is too high,” O’Keefe said.

Gov. Knowles was warned

“We warned our commissioner (Pat Pourchot) and the governor this could happen,” he told PNA Nov. 20. “DEC’s re-written the rules and it’s done so without the knowledge or support of the Legislature … or other state agencies. And look what’s happened. The Gulf of Mexico will be getting business that Alaska should be getting. … You can’t trust the state of Alaska anymore. We’ll sell you oil and gas leases but you’ll play heck getting them developed.”

When asked about the McCovey prospect (see page 1 story), which now appears to be headed to development with the approval of the state Department of Environmental Conservation, he said, “But look how much time — and probably money — it took to get to that point. … It’s too little, too late. The governor’s focused on the gasline and running for national office. … not on what supports this state — which is the oil business. He’s allowed a few low and middle level bureaucrats at DEC to change the rules of doing business in Alaska. … The train isn’t derailed yet, but the first car has left the tracks.”

The governor, he said, is “too proud to admit he’s lost control of his people. … He’ll just keep saying everything’s fine … reiterating how he got the NPR-A open. …

“I don’t see him cracking the whip at DEC,” he said. “It’s less than a year until John Shively or Frank Murkowski is elected. Maybe they can fix this.”

The 1 billion barrel rule

He did, however, address news reports that said BP would only explore where it thought it could find 1 billion barrel-plus fields .

“That’s not a hard and fast number. … And it’s not to say we don’t explore for fields that have less than a billion barrels. It’s sort of a criteria we have used for several years. Sometimes we have used it more rigorously than other times.”

The way “things are ranked in our world-wide exploration portfolio is those fields that are close to infrastructure, can be developed in a relatively short period of time and have 1 billion barrels, those are placed closer to the top. In the immediate future, we didn’t see that happening in Alaska.”

And the frontier prospects, he said, especially because of the regulatory climate and higher costs in Alaska, were not attractive investments for BP.

Editor’s note: PNA has made several requests for an interview with Gov. Knowles since mid-August both about allegations that DEC has changed the rules for the oil and gas industry, and to ask the governor what the state is doing to meet the need for increased domestic energy since the Sept. 11 tragedy. To date, no interview has been granted.