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BHP Says Labor, Equipment Hike Cost of Deepwater Atlantis Project

The operational start-up date of the deepwater Atlantis South field development in the Gulf of Mexico (GOM) "remains under review," but the ultimate costs for 44% stakeholder BHP Billiton Ltd. will be at least 50% higher, the company said Wednesday. The field, operated by majority stakeholder BP plc, had been expected to cost a total of $3.5 billion.

Australian-based BHP, which earlier pegged its share of costs at $1 billion, said inflationary pressures have pushed up the price to at least $1.5 billion. BHP also may face further costs to optimize production from the field once it ramps up. BHP also warned it is experiencing cost pressures on the deepwater Neptune development in the GOM, but it did not offer any specific guidance.

"While the majority of BHP Billiton's projects remain broadly on schedule, tight labor markets and shortages of equipment and supplies continue to be evident across the resources industry globally and will continue to impact project costs and schedules," BHP stated.

BP had no comment on either the revised timetable or whether costs were expected to rise further.

The Atlantis field is estimated to hold up to 575 MMBoe of reserves. At peak production, the platform's capacity is expected to be 180 MMcf/d of natural gas and 200,000 b/d of oil.

The Atlantis field, located in Green Canyon Block 743, was discovered by BP in 1998 (see Daily GPI, May 3, 2002). Considered at the time one of the top three fields in the GOM, Atlantis was originally expected to begin operation in late 2004, but delays pushed it into 2005. The hurricanes in 2005 then extended the ramp-up into 2006.

Last year, BP announced Atlantis would not begin operations before mid-2007 (see Daily GPI, Sept. 19, 2006). BP pushed back the start-up after it found problems in the subsea manifolds of its deepwater development Thunder Horse, a similarly designed platform.

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