By Sheila McNulty in Houston
Published: April 9 2010 04:00 | Last updated: April 9 2010 04:00
BP will this week begin shutting down about 50 per cent of the wells feeding its showcase Thunder Horse oil and gas platform, at a cost of about $500m (£328m) due to lost production and direct construction costs, the FT has learnt.
The repairs stem from BP’s decision to install a temporary bypass system to minimise delays on the Thunder Horse project in US waters in the Gulf of Mexico.
BP had been forced to put off the start of production at Thunder Horse, originally set for 2005, after a range of problems, including inferior welding on the subsea distribution systems and other underwater equipment, along with numerous defects on the production, drilling and quarters platform.
Thunder Horse eventually saw its first oil in July 2008 after the company installed a temporary bypass system that connected a few wells and enabled BP to start the field with minimum production.
That system was never intended to be permanent, so BP must now shut-in some of the production from the affected areas of the oilfield while it puts a permanent system in place.
BP does not comment on maintenance plans or schedules.
However, a source close to the company said it had sent a plan to do the work to regulators in the first half of last year, and added that the required pullback in production had been factored into BP’s production forecast.
BP has not said anything publicly about the repairs, which were revealed to the FT by a former employee with ties to the project.
But the company did say overall production this year would be lower than in 2009, after reporting 4 per cent growth for last year. Average production for 2009 was just less than 4m barrels of oil equivalent per day and, although this year's production is expected to be lower, growth is expected to resume in 2011.
The former employee said the shutdown would begin this week and last about 60 days. Getting the permanent subsea infrastructure in place is key to enabling BP to put a long history of problems with the Thunder Horse oilfield behind it.
In February, BP warned of a “slow and gradual” recovery in its US and European markets as it disappointed investors with its fourth-quarter results. Underlying profit, excluding one-off items, was $4.4bn for the fourth quarter of last year, up from $2.6bn in 2008.
For the full year, profit after tax was $14bn, down 45 per cent from the record outcome of $25.6bn in 2008, as a result of the fall in oil and gas prices and a squeeze on profit margins in refining.
But operating profits from exploration and production of oil and gas rose to $7.1bn, up from $4.3bn in the last quarter of 2008.