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More trouble for BP as gas scheme is halted
By Terry Macalister
The Guardian
February 5, 2007
BP has run into trouble with another of its prestige projects, the latest in
a spate of misfiring schemes.
The $4.2bn (£2.1bn) Shah Deniz gas field and associated pipeline in
Azerbaijan that is expected eventually to supply gas to Europe has been
forced to stop production just weeks after it came on stream.
BP will be under pressure from the City to explain the latest problems when
it reports flat annual profits to analysts tomorrow. The company will unveil
income of around $21bn - considerably lower than Shell's $25bn - and has had
its reputation tarnished by a string of high-profile setbacks in the US.
Problems with the Shah Deniz scheme come on top of the Prudhoe Bay leaks and
potential production delays from the Atlantis and Crazy Horse fields in the
Gulf of Mexico. They all came under the control of chief executive elect
Tony Hayward in his role as head of exploration and production, though he
has now handed on the job to his deputy, Andrew Inglis.
Mr Hayward is to take over from Lord Browne, who has decided to step down
early this summer after taking responsibility for a wider range of problems
in the US, including the Texas City refinery fire and propane-trading
irregularities.
The Shah Deniz scheme started to produce gas at the end of December - three
months later than hoped - but was forced to close in January. The Azeris
then announced that the field had resumed output only to admit that it had
been forced to shut down again with no definite date for supplies to be
resumed.
A spokesman for BP insisted yesterday that Shah Deniz had never restarted.
"We would like to have this all up and running but it is not unusual for a
new project to need something to be done," he explained. "We have discovered
a problem with the well and as a precautionary measure we have shut it down
while we sort it out."
Shah Deniz is operated by BP, which also has a 25% ownership stake with
other partners, including Statoil of Norway (25%) and Total of France (10%).
It was meant to bring gas into Europe without having to traverse countries
seen as politically unreliable such as Russia or Iran.
Around 8.6bn cubic metres of gas would be produced every year from a Caspian
Sea field and be transported by a pipeline built alongside the
Baku-Tbilisi-Ceyhan (BTC) link that carries oil from the region.
The $4.2bn price tag is attached only to the first phase of the project,
which would see four wells drilled at Shah Deniz and a pipeline built. There
are grander - and much more expensive - ideas to increase the size of the
whole scheme.
The shutdown has already caused problems for Georgia, which has been forced
to buy emergency gas supplies from Russia at a very high price. Georgia is
desperate to lose its energy - and political - dependence on Russia and saw
Shah Deniz as an opportunity to do this.
It is a further embarrassment for BP, whose incoming chief executive
admitted before Christmas that the company was often trying to do too much
for too little.
"The mantra of 'more for less' says that we can get 100% of the task
completed with 90% of the resources, which, in some cases, is OK and may
work, but it needs to be deployed with great judgment and wisdom," Mr
Hayward told staff in the US. "When it isn't, you run into problems."
Yesterday the BP spokesman denied his words had any relevance to Shah Deniz.
"I do not think this falls into that category," he said.
http://business.guardian.co.uk/story/0,,200 5874,00.html
By Terry Macalister
The Guardian
February 5, 2007
BP has run into trouble with another of its prestige projects, the latest in
a spate of misfiring schemes.
The $4.2bn (£2.1bn) Shah Deniz gas field and associated pipeline in
Azerbaijan that is expected eventually to supply gas to Europe has been
forced to stop production just weeks after it came on stream.
BP will be under pressure from the City to explain the latest problems when
it reports flat annual profits to analysts tomorrow. The company will unveil
income of around $21bn - considerably lower than Shell's $25bn - and has had
its reputation tarnished by a string of high-profile setbacks in the US.
Problems with the Shah Deniz scheme come on top of the Prudhoe Bay leaks and
potential production delays from the Atlantis and Crazy Horse fields in the
Gulf of Mexico. They all came under the control of chief executive elect
Tony Hayward in his role as head of exploration and production, though he
has now handed on the job to his deputy, Andrew Inglis.
Mr Hayward is to take over from Lord Browne, who has decided to step down
early this summer after taking responsibility for a wider range of problems
in the US, including the Texas City refinery fire and propane-trading
irregularities.
The Shah Deniz scheme started to produce gas at the end of December - three
months later than hoped - but was forced to close in January. The Azeris
then announced that the field had resumed output only to admit that it had
been forced to shut down again with no definite date for supplies to be
resumed.
A spokesman for BP insisted yesterday that Shah Deniz had never restarted.
"We would like to have this all up and running but it is not unusual for a
new project to need something to be done," he explained. "We have discovered
a problem with the well and as a precautionary measure we have shut it down
while we sort it out."
Shah Deniz is operated by BP, which also has a 25% ownership stake with
other partners, including Statoil of Norway (25%) and Total of France (10%).
It was meant to bring gas into Europe without having to traverse countries
seen as politically unreliable such as Russia or Iran.
Around 8.6bn cubic metres of gas would be produced every year from a Caspian
Sea field and be transported by a pipeline built alongside the
Baku-Tbilisi-Ceyhan (BTC) link that carries oil from the region.
The $4.2bn price tag is attached only to the first phase of the project,
which would see four wells drilled at Shah Deniz and a pipeline built. There
are grander - and much more expensive - ideas to increase the size of the
whole scheme.
The shutdown has already caused problems for Georgia, which has been forced
to buy emergency gas supplies from Russia at a very high price. Georgia is
desperate to lose its energy - and political - dependence on Russia and saw
Shah Deniz as an opportunity to do this.
It is a further embarrassment for BP, whose incoming chief executive
admitted before Christmas that the company was often trying to do too much
for too little.
"The mantra of 'more for less' says that we can get 100% of the task
completed with 90% of the resources, which, in some cases, is OK and may
work, but it needs to be deployed with great judgment and wisdom," Mr
Hayward told staff in the US. "When it isn't, you run into problems."
Yesterday the BP spokesman denied his words had any relevance to Shah Deniz.
"I do not think this falls into that category," he said.
http://business.guardian.co.uk/story/0,,200 5874,00.html