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Creating value is focus for new BP Exploration exploration head O’Keefe says Alaska exploration will continue to be infrastructure induced as BP centralizes, prioritizes projects including satellites Kristen Nelson PNA News Editor
At current low oil prices, it is hard to make an economic case for exploration. “You have to re-base the whole business and say, ‘how do we create value in today’s environment?’ “ Creating value in exploration is how F.X. O’Keefe sees his job at BP Exploration (Alaska) Inc., as the company’s new Alaska exploration business unit leader.
O’Keefe, who comes from the Amoco side of the recent BP-Amoco merger, was with Amoco for 18 years, primarily in international exploration, before coming to BP Exploration (Alaska) the first of the year.
He started working for Amoco in Denver in 1980 after earning a master’s degree in rock mechanics from Texas A&M, and has since spent time in Africa, the Middle East and Eastern Europe. Most recently he was in Houston as discipline manager for geoscientists — managing selection, development and deployment worldwide.
O’Keefe told PNA March 3 that it was great to be back in the line business. “Although,” he said, “it’s a tough time to be in the line business of exploration.” And that’s not just true for Alaska, he said, “but in many parts of the world it is hard to make an economic case for exploration.” That’s where creating value through exploration comes in. Quality controlling processes “We all went through a period in the late ‘80s when we clearly did not know how to do that,” O’Keefe said of the industry. That changed. At Amoco, “in about ’91 we got down to business on it and pulled exploration together and acknowledged that we’d destroyed a lot of value in the ‘80s and we weren’t going to do that anymore.”
O’Keefe said he thought BP and Amoco had similar histories, “learning how to explore in a value-based world rather than a geoscientist-salesman based world where the goal was to sell the prospect.
“Our goal is not to sell prospects. Our goal is to create value,” he said, and the way to do that, he said, is “by rigorously controlling our processes.” You quality control exploration and only drill the good prospects.
This involves more reliance on seismic, he said, but also a lot of reliance on peer assist — leaning on the worldwide knowledge of the company. The advantage of a company as large as BP Amoco, he said, is that you “can export knowledge around the world. …learn something in the North Sea and apply it to Alaska. Or in Alaska and apply it to Argentina.”
“So my slant on exploration,” O’Keefe said, “is that it is a process that can be quality controlled.” Centralizing satellite exploration O’Keefe said that BP Exploration (Alaska) will be centralizing satellite exploration in the exploration business unit, rather than each business unit handling its own satellite exploration. Prioritizing won’t be done in a vacuum, he said: Facilities and infrastructure availability are important, as is the expertise and institutional memory of the producing areas. And it probably won’t be that obvious a change to the outside world, O’Keefe said, “but from my perspective it will enable us to prioritize, pick the best ones.” With oil prices so low, “we’re not going to be able to do everything. We’re going to have to determine which is the best and do it first.”Seismic, exploration planning important this year This year BP has a seismic crew out on the western side of the North Slope and Shared Services Drilling is drilling the Red Dog exploration well between the Badami and Point Thomson units on the eastern side of the slope. O’Keefe said the extended reach portion at Red Dog had gone exceptionally well: on cost, on target and no accidents.
BP did not bid at the state’s February North Slope areawide sale, and O’Keefe said he didn’t see anything that would have added material value for the company. In the future, he said, BP will look at the North Slope areawide sale to fill in pieces “or if we have a new play or a new concept then we’ll actually go out and acquire a new play concept. But for right now, what we’re doing is looking at the portfolio of plays, trying to establish which ones are really going to be successful and so we didn’t really feel the need to fill in.”
As to the proposed spring lease sale in the National Petroleum Reserve-Alaska, O’Keefe noted that was an “unusual opportunity which doesn’t happen every year like the state slope-wide where we already have a significant inventory. So it certainly is an intriguing opportunity and it’s not one that comes along everyday.” Alaska exploration infrastructure lead BP Amoco worldwide has a portfolio which other companies would be hard pressed to match, O’Keefe said. “I think you’ll see us very successful on a worldwide basis even I this cost climate or this price environment.”
In Alaska, he said, “we do see it as infrastructure lead exploration. We have a tremendous advantage in infrastructure that we should be able to use and create value because we’ve got that.” BP has “a very strong position in the eastern part of the slope where we’ve got new developments,” O’Keefe said, “and I think you’ll see us continue to work in that area.”
He emphasized that BP is “working to defer, but not cancel, the future.” The company, he said, will “keep all the options alive and we will do them in the order that makes sense.”
We will have a drilling program, he said. “We’ve got rally a good inventory. And it’s a question of which ones come first.” There will not be the same number of rigs running as in years past, O’Keefe said. The capital budget has been reduced.
“And,” he said, “Alaska struggles to compete on a worldwide basis” because of “its geographic remoteness and high delivery costs.”
With or without the merger, he said, exploration would have been pretty hard to justify with Alaska North Slope crude selling at $10 a barrel. In addition to the costs in Alaska, other plays around the world, in a much earlier phase of exploration, are more active in delivering barrels, O’Keefe said, citing the Gulf of Mexico deep water, Trinidad and West Africa as examples.
Exploration in those areas, he said, “were leading the way for BP and Amoco separately, and they are still (now that the companies are) together.” Focus of 1999 Alaska exploration effort Exploration in Alaska is O’Keefe’s responsibility.
He is also a member of the BP Amoco exploration forum, which has input into the worldwide exploration program and of an exploration and access peer group composed of similar businesses within the company; that group manages the distribution of investments around the world among those opportunities, he said.
But the focus for O’Keefe is Alaska.
“A lot of this year will be about how do you build a viable exploration program that can really add material value,” O’Keefe said. “I know you can go out and find 20 million barrels, but that’s not material to either BP Amoco or Alaska, really.
“What both of us need is a … step change. And unless we can get there, we’re really not doing our job in exploration. I don’t think that’s going to be easy.”
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