newsminer.com

Courtesy of BP

The Associated Press

The Associated Press

The Associated Press

The Associated Press

FAIRBANKS — Technology advances are enabling BP to proceed with plans to develop its Liberty oil field in the Beaufort Sea using existing infrastructure, a move company officials say will limit the project’s environmental footprint.

Seismic studies started July 14 to help identify the best route to drill two miles down and seven or more miles out from the Endicott oil field’s satellite drilling island to the Liberty oil reservoir, said Doug Suttles, president of BP Exploration Alaska.

Ultra-extended reach drilling technology will be paired with advancements enabling multiple wells drilled from one surface location. Once proven at Liberty, the technology could open new offshore areas to drilling from land-based rigs and could be applied to developing resources at Point Thomson, estimated to hold a quarter of the North Slope’s gas reserves, Suttles said.

By drilling down from existing infrastructure then reaching out from a single rig, BP eliminates the need to build new offshore platforms, drilling islands or underwater pipelines, yet affords access to high-potential holdings in the Beaufort Sea.

Suttles said Liberty will push the outer limits of what the oil and gas industry can do — and added that until now, available technology has defined exploration. Proof positive that ultra-extended reach drilling works in the Arctic could spur exploration of new fields.

BP said it will spend $1.5 billion developing Liberty from Endicott’s Satellite Drilling Island, a gravel “island” that supports existing wells and is linked by causeway to Endicott. The only increase to BP’s footprint will be expansion of the Endicott island from 11 to 30 acres to make room for extended pipe racks, the massive drilling rig, and a workers’ camp.

The result would be the longest well ever drilled.

“It is absolutely introducing world-class drilling technology right here in Alaska,” project manager Darryl Luoma said.

Meanwhile, construction has started on a special rig designed by Parker Drilling capable of exerting enough force to bore laterally through miles of rock.

The rig should arrive at the island late next summer, Luoma said. A drilling team will train on location for at least three months before drilling begins in 2010. BP plans to drill as many as six extended reach wells.

If successful, BP will top the record for the longest well ever drilled by about one mile, Suttles said.

The project marks a number of other “firsts” as well.

It’s the first major development on the North Slope since BP’s Northstar well came online in 2001, Suttles said. He added that new projects are critical to maintaining flow in the oil pipeline.

Liberty would be the first fully federal lease developed in the Arctic. Other offshore developments are state leases. Companies developing federal leases don’t have to pay state production taxes, which represent significant savings and lower risk.

“If this were on state lands, it’s doubtful we’d have been able to move it forward,” Suttles said. “Alaska is a very high-cost environment for the industry.”

He said exploration is costly and a significant risk. That risk looks better when the prize at the end is bigger — large reserves, low costs and a shot at profit upon success.

Liberty would still net money for Alaska through the state’s share of federal mineral royalties. Plus, the oil field would extend the life of Endicott and its facilities, which pay taxes to the North Slope Borough.

Production at Liberty could peak at 40,000 barrels per day. BP estimates the project holds 100 million barrels of recoverable oil, and officials said production could boost the entire region.

“Production in Alaska is declining, and actually declining rather rapidly,” Suttles said.

Endicott, for example, is producing only a tenth of its peak volume, he added. Liberty could offset declines and meet demand for new sources of domestic U.S. oil production.

The Liberty field is about six miles offshore and east of Prudhoe Bay. BP drilled its discovery well there in 1997.