April 23 (Bloomberg) -- BP Plc, the biggest oil producer in the Gulf of Mexico, is unlikely to see output suffer after the Deepwater Horizon rig it leased exploded and sank, because the deposit it was drilling was relatively small.
The reservoir probably contains less than 100 million barrels and was of commercial interest mainly because of its proximity to existing pipelines, according to a person with knowledge of the matter who declined to be identified because the information wasn’t public. BP’s output in the area is 450,000 barrels a day.
“It’s not Thunder Horse, it’s not going to set them back three years,” said Iain Armstrong, an analyst at Brewin Dolphin in London. Thunder Horse, BP’s flagship deepwater Gulf project, was plagued by delays before starting production in 2008.
BP Chief Executive Officer Tony Hayward has spent his first three years in charge restoring the company’s reputation for safety following a deadly blast at the Texas City refinery in 2005. BP and rig owner Transocean Ltd. are still working to contain an oil spill, and 11 workers remain missing.
BP planned to tie the well drilled by Deepwater Horizon to the company’s Pompano platform, the person said.
Even though there is no indication that BP was at fault in the accident, the explosion and subsequent oil spill could be damaging to BP’s reputation. Political fallout could also set back the cause of deepwater drilling, where BP is an industry leader.
‘Probably Nobody’s Fault’
“It’s probably nobody’s fault, but in the perception of the media, BP is going to be under pressure,” said Christine Tiscareno, an analyst at Standard & Poor’s in London. “Even though operationally and ethically the company has turned around, this may pull it back.”
The Coast Guard said the oil slick from the platform is 10 miles wide and 10 miles long. Remote-operated vehicles found no new leakages from the well yesterday.
“We are determined to do everything in our power to contain this oil spill and resolve the situation as rapidly, safely and effectively as possible,” BP’s Hayward said in a statement today. “We have assembled and are now deploying world-class facilities, resources and expertise, and can call on more if needed.”
If the 11 workers still missing were killed, it would be the deadliest U.S. offshore rig explosion since 1968, when 11 died and 20 were injured at a platform owned by Gulf Oil Corp., according to data from the Minerals Management Service.
The March 2005 explosion of BP’s Texas City refinery, which killed 15 and injured hundreds, occurred when gasoline spilled into an antiquated vent system and ignited in a vapor-cloud explosion. The U.S. Occupational Safety and Health Administration in October 2005 found more than 300 safety violations and fined London-based BP, Europe’s biggest oil company, $21 million following an investigation.
BP’s safety record had been improving since the Texas City blast. The recordable injury frequency, a gauge of accidents for each 200,000 hours worked, fell to 0.34 last year from 0.43 in 2008. The figure was 0.53 in 2005, according to BP.
BP shares were little changed today after a 1.8 percent drop yesterday. They traded up 0.3 percent at 638 pence as of 2:17 p.m. in London.
Growing oil production from the Gulf of Mexico has contributed to BP’s turnaround under Hayward, who became CEO in 2007. BP decided to continue investing in the Gulf in the 1990s when drilling failures led the region to be dubbed the “Dead Sea.” The decision paid off.
About 450,000 barrels per day, or about 12 percent of BP’s production, comes from the Gulf including deepwater fields such as Thunder Horse and Atlantis.
Using supercomputers to analyze seismic images from under the region’s characteristic salt deposits, BP continues to make new giant discoveries including last year’s Tiber find, which may have 3 billion barrels of oil.
Tiber was discovered by the Deepwater Horizon, the rig destroyed in the accident. The company plans to continue to focus on the Gulf of Mexico. At a strategy presentation March 2, Andy Inglis, BP’s head of exploration and production, listed six Gulf of Mexico projects for which final go-aheads are expected in 2010.
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