July 20, 2008

BP Starts Work on Longest-Reaching Offshore Platform

By Tim Bradner, Alaska Journal of Commerce, Anchorage

Jul. 20--BP Exploration (Alaska) Inc. says it has started development of its long-planned Liberty project in the Alaska Beaufort Sea.

In a briefing in Anchorage, company officials said the project will cost $1.5 billion and is expected to produce about 100 million barrels with a peak rate of 40,000 barrels per day. Liberty is five miles offshore, in federally owned outer continental shelf waters, and is about eight miles east of the BP-operated Endicott field, which is now producing. Production is expected to begin in 2011.

Liberty is just outside the state of Alaska's three-mile territorial limit, beyond the state's tax jurisdiction, and if the field were located a mile or two to the south, it likely would not have been developed because of the state's high production tax rate, BP's Alaska president, Doug Suttles said. Alaska production taxes, changed by the state Legislature last year, take up to 80 percent of the net profit for new oil projects.

"Taking so much of the financial upside of the project would have left us very little to cover the risk of the project," Suttles said.

Liberty will be developed with four long-distance extended-reach wells drilled from the Endicott field. These will be drilled six to eight miles laterally from the surface location of the drill rig at Endicott and will be the longest extended-reach wells drilled to date, Suttles said. Two injection wells will also be drilled.

BP is an industry-leader in drilling long extended reach wells and has experience from wells drilled on the North Slope and the U.K. to draw on. Technical advances have allowed the wells to be pushed farther than those drilled before, however.

"To get a sense of this, if the drill rig were located in Downtown Anchorage, at the Port of Anchorage, it would be able to hit a target in the parking lot of the Carrs' grocery parking lot at Huffman Road in south Anchorage," except that the reservoir is also two miles underground, Suttles said

Parker Drilling Co. has been contracted to build a specialized rig for the project. An expansion of one of two gravel production islands at the Endicott field will be in 2009 and the new drill rig will be moved to the island later that year, Suttles said. Drilling is expected to begin in 2010, he said.

Darryl Luoma, Liberty project manager, said BP has also begun work on a high-resolution 3-D seismic program to get better data on the geology the eight-mile area between the rig location and the Liberty reservoir.

"With extended-reach wells at this length we have to have more knowledge of just what we will be drilling through," Luoma said.

Stability of the drill hole -- the potential for cave-in on a long near-horizontal section -- is one of the major risks facing the project, he said. The wells will be drilled vertically and then turned at about an 85-degree angle for the long lateral section to the reservoir, which is about two miles below the surface.

BP has been working on how to develop Liberty for about three years. The company initially considered building a gravel production island at the offshore site with a buried pipeline to shore, duplicating a similar gravel island and pipeline BP built in 2001 for its Northstar field, also offshore the North Slope. The gravel island idea for Liberty was abandoned after BP experienced regulatory and environmental issues, and delays, with Northstar caused costs to exceed estimates.

The company switched its Liberty plan to drilling production wells from an onshore location to take advantage of experience BP has gained with extended-reach drilling on the North Slope and elsewhere. Wells of such length are challenging because of the length of drill pipe that must be moved horizontally. The project requires a specialized, heavy drill rig.

The existing world records for extended-reach production wells is held by ExxonMobil Corp. at the Shayvo field off Sakhalin Island in the Russian Far East. Parker Drilling Co. also built and operates a specialized drill rig for that project, the Yastrub rig.

One other new Alaska offshore project, in Cook Inlet, is being planned for production with wells drilled from onshore. Pioneer Natural Resources Co. is evaluating development of the Cosmopolitan field about three miles offshore in Cook Inlet. Pioneer and previous operator ConocoPhillips have drilled exploration wells to Cosmopolitan from onshore.

Tim Bradner can be reached at [email protected]">[email protected]


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