BP Suspends Construction of Liberty Rig in Alaska

BP Plc, the largest producer of oil and natural gas in the U.S., suspended construction of a drilling rig at its Liberty project in Alaska to “take time to evaluate the safety systems” on the rig, Steve Rinehart, a company spokesman, said in a telephone interview.

BP’s Liberty project, estimated to cost more than $1 billion, is designed to tap a field in the Beaufort Sea estimated at more than 100 million barrels, according to the project website.

Production was expected to begin in 2011 and has now been delayed, Rinehart said. “We don’t have a new schedule,” he said.

The decision to halt construction of the drilling rig was made after “a number of engineering and design issues arose,” during construction, which began after parts of the rig reached Alaska’s North Slope in the late summer of 2009, Rinehart said. He declined to provide further details.

“It’s the first rig like this ever built and after the issues arose we decided to stop construction, not the project, and go through all the safety systems to ensure we have what we need,” Rinehart said. During the engineering evaluations, the focus will include “safety critical systems, power systems, and high pressure mud pumps.”

The rig will be located on a 31-acre manmade gravel island offshore that’s connected to land by a gravel causeway. To reach the Liberty field’s oil reservoir, five or six long-reach wells will be drilled. Once production begins, output is expected to be about 40,000 barrels a day, BP said on the project’s website.

Deepwater Horizon Rig

The final decision to halt construction was “put in place” yesterday and contractors involved and regulatory agencies were informed, Rinehart said.

“When we first announced the Liberty project we anticipated drilling in 2010 and the first oil in 2011, now we are going to wait until and see what the engineering schedule shows,” he said. “In the course of this review we can apply everything we’ve learned from the Deepwater Horizon rig.”

A blowout on April 20 of BP’s Macondo well 40 miles (62 kilometers) off the Louisiana coast in the Gulf of Mexico led to explosions that engulfed Transocean Ltd.’s Deepwater Horizon rig in flames and killed 11 crew workers.

The catastrophe sank the $365 million vessel and damaged the well, which gushed 4.9 million barrels of crude before it was capped on July 15.

“Even though the environment is different for the Liberty project, at the same time it’s a challenging project and is based on the ability to drill extended reach wells,” Rinehart said. “While the rig has unique capabilities to match these deep wells, we need to make sure going forward that every single piece has had a second look.”

To contact the reporter on this story: Samantha Zee in San Francisco at szee@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net.

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