A 2010 aerial shot of BP’s Liberty rig, standing on the Endicott satellite drilling island west of the Liberty deposit.
- - - - - -
Posted on 08/15/2014 2:06:33 PM PDT by thackney
As company works up new Liberty development plan, big rig remains sidelined
- - - -
It’s been five years since BP shipped a gigantic, specially designed drilling rig to Alaska’s North Slope to develop the offshore Liberty oil field.
But the rig has yet to drill a well. It’s just sitting there.
Exactly what BP plans to do with the behemoth, constructed by Parker Drilling Co., remains to be seen.
But one thing seems apparent - it won’t be used for the Liberty project.
BP has indicated as much in correspondence this year with the federal Bureau of Ocean Energy Management.
The company faces a Dec. 31 deadline to submit a revamped development and production plan for Liberty, which sits on two outer continental shelf leases.
The new plan “will not utilize” the Parker-built rig, said a May 7 letter from BP to BOEM.
$1 billion writedown
Parker Drilling fabricated the rig for BP at Vancouver, Washington, at a cost of hundreds of millions of dollars. The rig components arrived by barge on the North Slope in July 2009. The rig stands on a drilling pad near the Endicott field. Liberty is to the east, about six miles offshore in the Beaufort Sea.
The plan was to use the rig to drill superwells from shore to tap the Liberty reservoir. BP said these would be some of the longest extended-reach wells ever attempted, going down two miles and then bending out horizontally for six to eight miles.
But the drilling never commenced.
In November 2010, BP made the decision to pause on-site assembly of the Liberty rig to conduct an engineering review of the rig design, materials and key systems.
It was determined, according to BP’s 2012 annual report filed with the U.S. Securities and Exchange Commission, that the rig “would require significant changes and investment in order to meet BP standards, and that these were not viable.”
In June 2012, BP suspended the Liberty project. It was a costly decision, resulting in a nearly $1 billion impairment loss.
Old plan scrapped
BP drilled and tested the Liberty No. 1 well in early 1997. The company subsequently announced a commercial discovery estimated at more than 100 million barrels of recoverable oil. On April 22, BP announced a deal to sell a number of its North Slope properties to Hilcorp, including a 50 percent stake in Liberty.
BP is retaining responsibility for submitting the new Liberty development plan to federal officials.
The plan no longer involves drilling extended-reach wells from the Endicott area. Rather, BP is expected to propose a more conventional development that will involve building an artificial island in the Liberty field, with a subsea pipeline to carry the oil ashore.
The main purpose of BP’s May 7 letter to BOEM was to request withdrawal of the original Liberty development plan, which the old Minerals Management Service approved in 2008. The plan carried certain ongoing compliance obligations for BP.
In a July 24 reply to BP, a BOEM official said the agency would consider the 2008 development plan closed.
The new Liberty plan, due by year’s end, will replace the 2008 plan.
BP Alaska spokeswoman Dawn Patience told Petroleum News the fate of the extended-reach drilling rig, which belongs to BP and not Parker, remains undetermined.
A 2010 aerial shot of BP’s Liberty rig, standing on the Endicott satellite drilling island west of the Liberty deposit.
- - - - - -
BP contracted Parker Drilling to construct the rig, which involved a total cost of $215m.
http://www.offshore-technology.com/projects/liberty-project/
The rig is 240ft high.
The Liberty rig will be fitted with eight 2,640hp engines and powered by natural gas. The top drive of the rig will be 105,000ft / lbs of torque. The rig will have the capacity to accommodate 84 people.
The u-ERD technology used to develop the field will extend the reach of the wells to world-record distances of 34,000-44,000ft.
The wells will follow a vertical path beneath the drilling rig and then turn to a horizontal position in the direction of the field. The well will again bend into a vertical position and penetrate into the field reservoir. The length of the wells will require fluid pressures of about 7,500lb / in² to pump oil from the reservoir.
The first well of the Liberty oilfield was discovered by BP in May 1997. BP presented a development programme for the field in February 1998 to the US Minerals Management Service (MMS).
In 2002, the US MMS disapproved the plan due to environmental concerns. As a result, development of the field was put on hold. Following BP’s decision to use ultra-extended-reach drilling, development began in 2005.
What’s your take on Ballot Measure One? Knowles and Murkowski tell us to vote no.
That makes me think I should vote for it...
It will require 17 megawatts of electricity.
the 8,500-ton rig
One would think there’s some risk of accumulated gasses on an enclosed structure like that.
I bet they don’t serve beans in the mess hall...
I would vote no. The original oil profit tax put in place by the Palin administration strangled the oil/gas industry in Alaska.
It was the main reason while the lower 48 oil industry was begin to boom, Alaska continued to decline.
It was a significant part of my decision to leave Alaska in 2007 and return to Texas to a more rewarding business climate.
From my point of view, it was an insanely high tax that drove the investment money from Alaska to other locations.
I was leading an engineering department in Anchorage at the time it went into place (retroactively). Within a couple years, the department I had lead had fallen to 1/3 its size while the majors canceled projects and stop investing for real future projects of significance.
The climate and transportation challenges make the North Slope work long term projects. The tax now is still too high in my opinion but acceptable for some investment into Alaska North Slope. To raise it again would show companies Alaska isn’t done yet trying to strangle their golden goose.
Thanks.
Risk yes. But there is no other choice for working in that environment. I say that after 4 years of engineering design for North Slope oil field facilities 2003-2007.
Very informative post. Question: Is Alaska strangling it all on their own, or is the US government making it significantly worse?
The climate and transportation challenges make the North Slope work long term projects. The tax now is still too high in my opinion but acceptable for some investment into Alaska North Slope. To raise it again would show companies Alaska isn’t done yet trying to strangle their golden goose.
It isn’t Alaska trying to kill off the oil companies - it’s the **Demo(n)crats**. Les Garza is leading the attack.
The US government certainly prevents drilling on too large and area, insanely large.
However, there is over 150 million acres outside the federal control. Almost as big as all of Texas and larger than California.
Alaska has created many roadblock, mostly taxes and fees, to make it tough to be economic. In my opinion, the biggest problem with the continued effort by the state to never stop changing the tax structure. There is no stability. Project up there take a long time to develop and then pay out. Tax structure typically changes twice before they reach break even point.
It is not a business friendly environment, and the oil/gas industry is specifically targeted. For example, property taxes are only local, unless it is oil/gas producing property. If it is an oil/gas production, then it must pay a state level property tax. Not to be confused with royalties and production taxes, which they also pay.
“It is not a business friendly environment, and the oil/gas industry is specifically targeted.” Almost half of the employed people of Alaska work for a branch of the Gov’t.: county, state or federal. Many of those people are hostile to the oil industry, which is looked upon as a cow to be milked. The milk is called the “dividend”, an annual payout to residents that is extracted from oil companies.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.