BP PLC has decided not to proceed with a groundbreaking $1.5-billion (U.S.) offshore oil project in Alaska after concluding it would be too expensive.
A review carried out in the wake of BP's 2010 Gulf of Mexico oil spill found that the plan for the Liberty field did not meet BP's new, higher safety standards. Putting it right would have driven up project costs and caused further delays to a development that is already well behind schedule.
"At the moment we don't feel it's economically viable," a spokesman said on Wednesday.
The move shows how the cautious, conservative approach BP has adopted since the explosion and fire at the Deepwater Horizon rig that killed 11 men and triggered the world's worst offshore oil spill is already having an impact on its production plans.
Discovered in 1997, the Liberty field is about eight kilometres off Alaska's northern coast in the shallow waters of the Beaufort Sea. It has estimated recoverable reserves of 100 million barrels, and was expected to produce 40,000 barrels a day.
BP originally planned to build an artificial island out at sea to access the oil, but failed to win the necessary regulatory approvals.
Under a new plan it would have sited its drilling rig closer to the shore and made history by drilling the longest "extended reach" wells ever attempted by the oil industry.
Wells drilled laterally from onshore to access offshore reservoirs have long been a feature of the Alaskan oil sector. But BP's wells, drilled out from a small man-made island near its existing Endicott field, would have been eight miles long and two miles deep - a world record.
In 2010, BP said it had suspended construction of the drilling rig planned for Liberty, one of the world's largest, due to technical and engineering problems. It then launched a detailed 18-month review of the project's risks and economics, as well as the rig systems. In the end, it concluded that Liberty did not meet the higher standards for drilling safety and environmental protection BP had adopted in the wake of the Gulf of Mexico disaster.
"We have always said that we will not proceed with the project unless we can do it safely and meet all our standards," a spokesman said. "In the end, the project as currently designed does not meet our test."
He said changes would have needed to be made to the hydraulics, mud, heating and utility systems and other aspects of the plan, resulting in "substantial additional costs and schedule delays".
He said BP was working with regulators to discuss the "potential forward plans" for Liberty.