BP to Apply Alaska Skills in Arctic Deal with Rosneft

LONDON Oct. 3, 2007 (Dow Jones Newswires)BP PLC (BP) wants to apply the skills it gained in its Alaskan work on a deal with Russian state-controlled oil company Rosneft (ROSN.RS), for exploration and production in the Russian Arctic, the head of exploration and production for BP said in a speech last week that was closed to the press but released on the company's Web site Tuesday.

The statement is a manifestation of BP's stance under new Chief Executive Tony Hayward, who, refusing to be paralyzed by the company's operational woes, wants BP to take well-calculated risks and show a newly regained assertiveness.

Andy Inglis, BP's head of exploration and production, said that "recently, the spotlight has been on some corrosion issues, which we are now addressing" at the company's Alaska operations.

The company had to partly shut down its Prudhoe Bay field when the issues were uncovered in August last year. Prudhoe Bay was one of a number of problems BP faced, following a deadly blast at the company's Texas City, Texas, refinery in 2005.

"But if you look at Alaska over the longer term, you see a record of managing risks and passing milestones," Inglis said.

"In the 1970s, we estimated that we would recover some 40% of the 25 billion barrels of oil in place at Prudhoe Bay. Now recovery is estimated at close to 60%," he said.

"We can apply these same skills elsewhere in the world," he said. "An example of this is our memorandum of understanding with Rosneft in the Russian Arctic."

Rosneft signed an agreement with BP last year to work together on exploration and production projects in Russia's Arctic region.

"As a leading (international oil company), we take and manage big risks for commensurate rewards," Inglis said.

"People will look hard at the risks faced by an (international oil company)," he said. "It's important to balance that by understanding how those risks can be successfully managed when the (company) is making a distinctive contribution and building robust partnerships."

But Inglis also said the presence of the world's largest oil and gas reserves in some of the most challenging parts of the globe is one the hardest risks international oil companies have to face.

"More than 75% of the remaining proved oil reserves are in three regions - the Middle East, Africa and Russia," he said. "More than half of the proved natural gas reserves are in just three countries - Russia, Iran and Qatar.

"This raises fears about whether supplies can be maintained, especially when some producer countries have experienced conflict, tension and extreme weather events," he said.

Copyright (c) 2007 Dow Jones & Company, Inc.