BP 2006 Annual Report Download - page 25

– On 7 August 2006, an orderly and phased shutdown of the Eastern
Operating Area of the Prudhoe Bay oil field began following the
discovery of unexpected corrosion and a small spill from a Prudhoe
Bay oil transit line. In September, we determined that the oil
transit lines in the Eastern Operating Area of Prudhoe Bay could be
returned to service for the purposes of in-line inspection. By the end of
October we had returned to service all three flow stations previously
shut down.
– Current production from Prudhoe Bay is more than 400,000 barrels of
oil and natural gas liquids per day (gross). BP has a 26.4% interest in
the Prudhoe Bay field.
– In response to the recent corrosion discoveries, BP has decided to
replace the main oil transit lines (16 miles) in both the Eastern and
Western Operating Areas of Prudhoe Bay. In addition, BP plans to
spend over $550 million (net) over the next two years on integrity
management in Alaska. BP has retained three eminent corrosion
experts to evaluate independently and make recommendations for
improving the corrosion programme in Alaska. BP has also asked an
independent ombudsman to undertake a review of worker allegations
raised on the North Slope of Alaska since the acquisition of ARCO
in 2000 to determine whether the problems have been addressed
and rectified.
– In February 2007, BP temporarily shut down its Northstar production
facility to repair welds in the low pressure gas piping system. BP is
currently finalising inspections and has begun repairs.
United Kingdom
We are the largest producer of oil and second largest producer of gas in
the UK. BP remains the largest overall producer of hydrocarbons in the
UK. In 2006, total liquids production was 253mb/d, a 9% decrease on
2005, and gas production was 936mmcf/d, a 14% decrease on 2005. This
decrease in production was driven by the natural decline, operational
issues and lower seasonal gas demand. Our activities in the North Sea
are focused on safe operations, efficient delivery of production
and midstream operations, in-field drilling and selected new field
developments. Our development expenditure (excluding
midstream) in the UK was $794 million in 2006, compared with $790
million in 2005 and $679 million in 2004.
Significant events were:
– Drilling continued during 2006 on the Clair Phase 1 development (BP
28.6% and operator) programme and is scheduled to continue through
2008.
– In September 2006, BP reached an agreement, subject to Department
of Trade and Industry (DTI) approval, to acquire acreage in the UK
Central North Sea that contains two discovered fields and further
exploration potential.
– BP and its partner approved the front end engineering and design for
the Harding Area Gas Project (BP 70% and operator) in July 2006.
This represents the first stage of a development project to allow the
production of gas from the Harding area and prolong the life of the field
beyond 2015.
– Progress continued during the year on the Magnus Expansion Project
(BP 85% and operator), with first oil achieved in October 2006.
– The UK government approved the North West Hutton
decommissioning programme in April 2006. BP, on behalf of the
owners of North West Hutton (BP 26% and operator), awarded a
contract in October 2006 for the offshore removal and onshore
recycling of the installation. Detailed engineering work for removal
has begun. Platform removal is expected to start in 2008 and to be
completed by the end of 2009.
– In December 2005, the UK government announced a 10%
supplemental tax increase on North Sea oil profits, taking the total
corporate tax rate to 50%. This tax increase became law in July 2006,
with effect from 1 January 2006.
– In March 2006, we reached agreement for the sale of our 4.84%
interest in the Statfjord oil and gas field. This sale was completed
in June 2006.
Rest of Europe
Development expenditure, excluding midstream, in the Rest of Europe
was $214 million, compared with $188 million in 2005 and $262 million
in 2004.
Norway
In 2006, our total production in Norway was 66mboe/d, a 20% decrease
on 2005. This decrease in production was driven by natural decline.
Significant activities were:
– Progress on the Valhall (BP 28.1% and operator) redevelopment
project continued during 2006. A new platform is scheduled to become
operational in 2010, with expected oil production capacity of 150mb/d
and gas handling capacity of 175mmcf/d.
– Drilling continued through 2006 on the Valhall flank development
and water injection projects. The flank drilling programme was
completed in September 2006 and water injection drilling will continue
during 2007.
– In March 2006, we reached agreement for the sale of our interest in
the Luva gas discovery, in the North Sea. This sale was completed in
the second quarter of 2006.
Netherlands
In May 2006, we announced our intention to sell our exploration and
production and gas infrastructure business in the Netherlands. This
includes onshore and offshore production assets and the onshore gas
supply facility, Piek Gas Installatie, at Alkmaar. The sale was completed
on 1 February 2007 to the Abu Dhabi National Energy Company, TAQA.
Rest of World
Development expenditure, excluding midstream, in Rest of World
was $4,522 million in 2006, compared with $3,735 million in 2005
and $3,082 million in 2004.
Rest of Americas
Canada
– In Canada, our natural gas and liquids production was 57mboe/d in
2006, a decrease of 10% compared with 2005. The year-on-year
decrease in production is mainly due to natural field decline.
– BP has been successful in obtaining new licences in British Columbia
and Alberta land sales. The acquired acreage will form part of the Noel
tight gas development project in north-eastern British Columbia. The
project will involve drilling up to 180 horizontal wells and innovative
fracturing technology to develop the remainder of the resources.
Trinidad
– In Trinidad, natural gas production volumes increased by 14% to
2,265mmcf/d in 2006. The increase was driven by higher demand due
to the ramp-up of Atlantic LNG Train 4. Liquids production declined by
2mb/d (5%) to 38mb/d in 2006.
– Cannonball (BP 100%), Trinidad’s first major offshore construction
project executed locally, started production in March 2006. Production
increased during the year and the asset is currently providing gas for
the Atlantic LNG trains.
– BP sanctioned the development projects for Red Mango (BP 100%) in
April 2006 and for Cashima (BP 100%) in August 2006. First production
is expected by the end of 2007 and in 2008 respectively.
Venezuela
– In Venezuela, our 2006 liquids production reduced by 25mb/d
compared with 2005, mainly as a result of the enforced reduction of our
interests in the non-BP-operated Jusepin property and the Boqueron
and Desarollo Zulia Occidental (DZO) reactivation projects, which BP
operated until 31 March 2006 under operating service agreements on
behalf of the state oil company, Petroleos de Venezuela S.A. (PDVSA).
– In August 2006, BP signed conversion agreements to co-operate with
PDVSA in setting up incorporated joint ventures in which PDVSA would
be the majority shareholder. The structures for the incorporated joint
ventures were established in December 2006 and these are now the
operators of the Boqueron and DZO properties.
BP Annual Report and Accounts 2006 23