BP Trinidad and Tobago - Press - BPTT Projects update

Salutations

Mr Wayne Bertrand, Chairman of today’s proceedings

The Honourable Senator Conrad Enill, Minister of Energy and Energy Industries

(if present)

Fellow presenters

Conference participants

Good morning.

I would like to first congratulate the organizers of the Energy Caribbean 2009 Conference for putting together what I am sure will be an informative and insightful two days. Events such as these serve to remind us of the key role that Trinidad and Tobago continues to play in the global energy sector. As a representative of BP Trinidad and Tobago, I can assure you that it is a role we do not take lightly as we set out and execute our activities.

First, a bit about bpTT. BPTT produces about 460 thousand barrels of oil equivalent a day from 12 offshore platforms. Our production represents approximately 55 percent of Trinidad and Tobago’s production and ten percent of BP global’s production. Our CAPEX for 2009 is approximately US$500 million.

This morning I will be giving an update on bpTT activity with a look to the future. I will be presenting it from a major projects perspective, the phase that bridges the gap between successful exploration and profitable production. It is an essential step.

Each project within the BP group, for example, needs to compete with others for a share of capital expenditure. In today’s environment, each project must demonstrate the most efficient application of resources to secure capital.

Current environment

We have all heard, watched and read about the performance of the global economy over the past few months. I am not about to repeat what has already been said. I will say that today’s economy is generally characterized by uncertainty and the need for a more efficient approach to doing business. Commodity price fluctuations over the past few months have made liars of those who try to predict their movement. We are now seeing some resurgence in oil and natural gas prices. That is good for business but it could mask the underlying uncertainty that characterizes global energy markets.

Regardless of where prices are today, the environment dictates that we stick to the fundamentals of good business practice. Businesses need to focus on effective cost management and protecting margins through efficient operations.

Slide 2 – BPTT overview

BPTT’s approach to delivering competitive returns and safe and reliable operations has been to focus on improving efficiency and eliminating waste. As I noted earlier, bpTT’s production averages 460,000 barrels of oil equivalent per day. To sustain that level of production, the business needs to bring 1 trillion cubic feet a year into production. Although the current environment has demanded that we review all of our projects, cancelling them is not an option because that would impact our ability to fulfill our contracts.

In this environment, good project management should allow companies to reduce uncertainty to some extent by ensuring that projects are delivered in a safe manner, on time and within budget. Yet, the tenets of good business practice and good project management are not driven by fluctuations in the global market and changes in the economy; the principles that drive effective business practices are enduring. The need to execute projects on time and within budget is critical in the current environment, and it will continue to be central to business practice into the future.

There is also a need to ensure that projects are delivered without injury to people or damage to the environment.

BP has developed a strong track record for delivering successful projects on time and within budget. Before I review our current and future projects, I will share the overall framework that guides all Major Projects within BP and the project principles that underpin that framework.

Slide 3 – Projects Framework

BP’s Projects Framework sits within the wider structure of BP’s management framework, which defines the way we do business within BP and how we interact with the world. The management framework includes our Code of Conduct, Group Standards, our Operating Management System, and a Capital Value Process.

Slide 4 – Capital Value Process

BP’s Capital Value Process is a stage gate process that is used to guide us to better and hopefully the best business decisions. As you would see in this slide, the Capital Value Process is a structured and integrated approach to project selection, development and execution to ensure that we always choose the right project and develop and deliver that project in the best possible way.

Projects overview – 2009/2010

And now to take a look at the projects…

Effective use of the Capital Value Process is predicated on what I have defined as one of the three major factors for project success – having a clearly articulated business and project strategy in place. You would also note that in the Capital Value Process, there is a heavy bias on what we describe in BP as ‘front end loading’ where the project scope and plan are defined with sufficient detail to gain buy-in from all stakeholders to minimize changes once the project has been sanctioned. The “execute” and “operate” stages are important, but it is the early front end loading stages that will ensure that a successful project has been identified and designed. Benchmark studies have proven that ‘front-end loading’ is the single most important factor in determining project management outcomes.

Slide 5– Savonette

The highlight of our activities in 2009 was producing first gas from the Savonette platform in October. The Savonette field was discovered in 2004 with the Chachalaca 1 exploration well. It was bpTT’s fourth platform to be designed and built locally following the standardized concept. Savonette is tied into the existing Mahogany B platform. Savonette was preceded by the Cannonball, Mango and Cashima platforms

Fabrication took 24 months to complete. The jacket was installed in September 2008 and the topsides in February 2009. Savonette is a normally unmanned installation with a capacity of 1 billion cubic feet a day. The project cost US$530 million, including wells. T&T nationals accounted for more than 75 percent of the manhours worked.

Slide 6 – Serrette

Work also continued on the fifth standardized platform, Serrette, in 2009. Like its predecessors, Serrette is an normally unmanned installation which is being designed and built locally. It is currently under construction by TOFCO at the La Brea Industrial Estate. Detailed engineering is 99 percent complete. The deck is 85 percent complete and the jacket is 95 percent complete. Phase 1 of the project captures up to 0.7 billion cubic feet of sanctionable resources with 5 wells. Serrette is due to be installed in 2010 and first gas is due in 2011.

It is important to note that bpTT has delivered Savonette and is in the process of delivering Serrette while maintaining its commitment to safety. BPTT has now worked more than 13 million manhours without a Day Away From Work Case and safety continues to be our number one priority.

The combination of a standardized concept and local construction has been a successful approach for bpTT, allowing the company to improve its efficiency with each platform.

Our decision to have the design and engineering work for Cannonball done locally saw the number of man-hours performed by nationals on bpTT design/construction projects increase from less than 10% to more than 60%. Since Cannonball we have designed and constructed four additional NUI ‘clone’ platforms – Mango, Cashima and Savonette. Project man-hours performed by nationals on Mango, Cashima and Savonette have increased to more than 70%. Local content as a whole has also benefited from this decision to construct and manage these projects locally. Local content has since grown from 38% to 68% on Savonette, which was installed early this year.

As a result we have also seen improvements in the engineering execution time for each project. The engineering work went from 14 months on Cannonball to 13 on Mango, 11 on Cashima and 11 on Savonette. We expect the engineering work for our latest clone NUI, Serrette, to be completed in 9 months, which means that in just eight years, we have been able to reduce our platform engineering execution by five months, which of course translates into improved capital efficiency.

In addition to introducing greater capital efficiency, reducing safety risk and developing local engineering capability, we have improved the technology and efficiency of our offshore infrastructure – our business has evolved from installing heavier platforms that require high levels of maintenance to lighter and more efficient platforms. One of our early offshore gas platforms Mahogany weighed 3,000 tonnes, while Cannonball weighed just 900 tonnes.

BPTT Projects update - part 1