BP's Liberty Project Suspended In Alaska Due To Costs And Setbacks

BP Suspends Alaska Oil Project

* Decision made after 18-month review

* Project would have cost "a lot more" than $1.5 bln

* Liberty project has history of delays, problems

By Yereth Rosen

ANCHORAGE, Alaska July 9 (Reuters) - BP has indefinitely suspended a $1.5 billion offshore oil project in Alaska due to cost overruns and technical setbacks, a company spokeswoman said on Monday.

An 18-month company review concluded that the Liberty project, a field with about 100 million barrels of recoverable oil, should not go forward as planned, said Dawn Patience with BP Exploration (Alaska) Inc.

"We are not going to pursue Liberty in its present form," said Patience. "The project, as it's designed right now, doesn't meet BP's standards."

Under plans submitted five years ago to regulators, Liberty would have been the first oil field located entirely in Federal waters offshore Alaska. Back then, BP expected production to begin in 2011.

A BP review found that Liberty -- slated to produce 40,000 barrels a day -- would have cost "a lot more" than the $1.5 billion BP had planned to spend there and would have taken several additional years to begin production, Patience said.

BP may still try to develop Liberty later.

The project "has to be discussed with regulators before we could move forward with a (new) plan," Patience said.

BP has informed federal regulators it is seeking to redesign the development, said a spokesman for the U.S. Bureau of Ocean Energy Management.

"They're talking about putting together a plan for another approach," said John Callahan, a BOEM spokesman in Anchorage. BP officials met last week with BOEM officials to discuss potential changes to the Liberty development plan, he said.


Monday's announcement is the latest in a series of delays and technical problems for Liberty.

A 1998 plan to develop the offshore field was shelved in 2002 because of cost concerns, according to an environmental impact statement.

A redesigned plan was submitted to Federal regulator Minerals Management Service in 2007. It called for BP to develop and produce Liberty from shore, using ultra-extended-reach wells to target an offshore reservoir up to eight miles away. Liberty oil was to be drilled from an existing island-causeway system used for BP's Endicott field, and would have been processed at Endicott's facilities, according to BP's plan.

At the time, officials with the North Slope Borough and other local organizations hailed the idea as innovative, saying it was safer for the environment than the alternative of constructing a new artificial island and stand-alone processing facilities.

Construction work began in 2009 at Endicott to accommodate Liberty development.

But in 2010, BP announced another delay, citing rig-design problems, regulatory changes, and new scrutiny of the Liberty project following BP's Deepwater Horizon disaster in the Gulf of Mexico. That kicked off a comprehensive review of the project, Patience said.

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