Environmental Planning for Oil and Gas Projects in Alliance Organizations

Abstract

Abstract Oil companies are increasingly adopting the "alliance" organization to develop innovative engineering solutions to make projects economic in an industry characterized by global opportunities and competition for investment dollars. This structure involves strategic contractual relationships between companies and contractors. On Alaska's North Slope, BP Exploration (Alaska) Inc. has formed alliances to engineer and develop its Badami and Northstar oil fields. These fields are small in comparison to Prudhoe Bay and Endicott and their economics cannot support high capital and operating costs. Costs, reserves, and permits are the three major building blocks of a successful oil development project. The alliance structure presents some special challenges and opportunities in successfully designing an environmentally sensitive project and obtaining permits. On the Badami project, permitting has required that alliance members, the regulators, and BPXA environmental personnel develop a mutual understanding and integration of engineering and environmental constraints and opportunities. Part of the communications challenge has resulted from the differing mandates and boundaries of the alliance and the external requirements of environmental laws and regulations. The lessons learned on Badami have been adopted in environmental planning and permitting the Northstar project. Introduction Corporations, including oil and gas companies such as BP Exploration (Alaska) Inc. (BPXA), are increasingly forming strategic business relationships - called alliances - with other companies to accomplish specific projects. Such arrangements are used for a variety of reasons, but most particularly to address the competitive challenges of the business environment. Low world oil prices have challenged the oil industry economically. In Alaska, the problem is exacerbated by the high cost of transporting oil to market and the economic premiums of development in the harsh Arctic environment. On Alaska's North Slope, BPXA established an alliance with contractors in 1994 to develop the Badami oil field, which is located about 25 miles east of Prudhoe Bay (Fig. 1 and 2). In 1995, BPXA initiated another alliance to develop its Northstar oil field, located in the Beaufort Sea about 6 miles offshore of the Prudhoe Bay oil field. An array of major permits is needed for construction and operation of both projects thus requiring a significant environmental planning effort. Concurrently, project engineering and design, and reservoir access depletion planning needed to be integrated to ensure full project coordination. The alliance structure involves contractual, project management, and other business arrangements different from those typically involved in relationships between an oil company and its contractors. This structure presents a number of special opportunities, challenges, and problems to incorporation of environmental features in design and the successful acquisition of project permits. After a brief review of the Badami and Northstar alliances, this paper reviews these aspects of engineering and design and the lessons learned to date of these projects. The lessons learned on the Badami development are being applied to the Northstar project, which is currently in the Environmental Impact Statement (EIS) phase of environmental review and permitting. The Badami Development and Alliance Organization In 1993, BPXA purchased the majority interest in the Badami Unit from Conoco (Fina is BPXA's partner in Badami). Located 25 miles east of the existing Prudhoe Bay infrastructure, the Badami oil field is economically marginal by North Slope standards, in spite of recoverable oil reserves currently estimated at approximately 100 million barrels. The reservoir is located mainly offshore in Mikkelsen Bay, but most of the reservoir can be reached from onshore (Fig. 2). P. 815