BP Scales Back Alaskan Operations

BP's will cut about 120 of its 600 positions in its Anchorage, Alaska office. The company is also going to shelve a costly offshore development project. The pullback is part of a plan to abandon risky frontier development in favor of enhanced production at existing, large North Slope fields, said Ronnie Chappell, spokesman for BP Exploration (Alaska) Inc. "What we did today was to roll out a strategy for sustaining our business in Alaska for the long term," he said.

That strategy means concentrating on core production areas - the large oil fields of Prudhoe Bay, Kuparuk and Milne Point, where investments can result in the quickest and most cost-effective production of new oil, he said. "There's a 7 billion barrel oil equivalent resource base beneath our feet at Kuparuk, Milne and Prudhoe," he said.

The company has decided that its offshore Liberty project, which holds about 120 million recoverable barrels, is too costly to pursue for now, Chappell said. "We announced today that we are putting the Liberty project on the shelf," he said. The field's development cost is estimated at $600 million, close to the $700 million spent to bring BP's offshore Northstar field on line, he said.

BP had earlier envisioned Liberty as a project similar to Northstar, which holds about 175 million recoverable barrels and started production about two months ago, Chappell said. But Liberty proved less attractive over time, he said. "We determined that, as a Northstar look-alike, that project is not competitive with the other projects that we have in Alaska or within BP," he said. The Liberty field is located outside of state waters, within the federally managed continental shelf. The Northstar project, which covers both state and federal property, provided the first ever commercial oil production from Alaska's continental shelf. The Northstar project was over budget and production was two years later than expected. The oil field was the subject of special state incentive legislation, a lawsuit that reached the state Supreme Court and disputes over oil-spill preparations.

In addition to the staff cuts, the company plans to eliminate about 75 of its approximately 100 Anchorage-based contract workers, Chappell said. That figure excludes contractors who manage the company's computer system. The cuts will not extend to the North Slope oil fields themselves, Chappell said. "We will not be reducing the number of operations and maintenance staff employed on the North Slope," he said. BP expects to add to those positions, he said. BP plans to move its Alaska frontier exploration duties out of Alaska to Houston.