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Bloomberg: Exxon Mobil’s Tillerson Says BP Delay `Disappointing’ (Update3)

By Joe Carroll

Oct. 5 (Bloomberg) — Exxon Mobil Corp. Chief Executive Officer Rex Tillerson criticized BP Plc for delays starting their jointly owned $1 billion Thunder Horse oil platform in the Gulf of Mexico.

Thunder Horse, a 50,000-ton floating production facility, nearly sank after Hurricane Dennis in July 2005, a storm that did little damage to other offshore platforms and rigs. BP, operator and 75 percent owner, last month said Thunder Horse won’t begin pumping oil until 2008. The original start date was in 2005.

“It’s been extraordinarily disappointing,” Tillerson said in an interview yesterday at Exxon Mobil’s Irving, Texas, headquarters. “From the beginning, we offered our technical opinions,” he said. “We provided a lot of the technology used on Thunder Horse.”

BP faces complaints by regulators, lawmakers and investors for several missteps in the U.S. An explosion last year at its Texas City, Texas, refinery killed 15 people, and failure to properly monitor and maintain the pipes at its Prudhoe Bay oil field led to the biggest spill ever on Alaska’s tundra.

Toby Odone, a spokesman for London-based BP, declined to discuss Tillerson’s statement. “We’ve made a lot of comments on Thunder Horse over the past few months, and there’s really nothing more to add,” he said.

Prudhoe Bay

Exxon Mobil and ConocoPhillips are partners in Prudhoe Bay, the biggest U.S. oil field, and BP is operator. The field had to be partially shut in August because of pipeline corrosion, boosting crude oil prices and prompting members of Congress to call BP’s U.S. chief, Robert Malone, to a hearing last month.

Tillerson’s comments are the first public critique of BP’s actions by one of its oil company partners.

“That kind of public infighting really surprises me,” said Peter Dunay, who helps manage $150 million at Leeb Capital Management in New York. “You don’t see that sort of thing, unless one company wants the other to do something and they’re not doing it.”

Thunder Horse, located 150 miles south of New Orleans in 6,050 feet of water, will surpass Royal Dutch Shell Plc’s Mars platform as the biggest producer in the Gulf of Mexico once it comes on line. Thunder Horse’s output is expected to rise to the equivalent of 280,000 barrels of crude a day at its peak.

“I don’t see that as a criticism but more as an expression of frustration,” said Michael Cuggino, who manages $760 million at Pacific Heights Asset Management LLC in San Francisco. “It’s a short-term business issue. They’ll get it straightened out.”

Production Declines

Exxon, the world’s largest oil company, is still committed to Thunder Horse, said Tillerson, who succeeded Lee Raymond as chief executive in January.

“We haven’t thought yet of pulling out,” Tillerson said in the interview.

BP, the world’s third-largest oil company, said this week that its production fell for a fifth consecutive quarter because of the Prudhoe Bay disruption.

Houston-based ConocoPhillips, which owns 36 percent of Prudhoe Bay, said on Oct. 3 that its worldwide output in the third quarter fell 5 percent from the second-quarter partly because of BP’s troubles in Alaska.

BP announced last month that equipment on the seafloor that connects oil wells to the Thunder Horse platform had failed. The project, which has incurred hundreds of millions of dollars in repairs, was the latest debacle to beset BP CEO John Browne.

Refinery Safety

Browne is seeking to restore investor confidence after the March 2005 explosion at the Texas City refinery, which prompted lawsuits and shut the plant for months. The company is also being investigated for improper trading in crude, propane and gasoline markets.

The company announced plans last month to move about 500 workers at its Whiting, Indiana, refinery from offices that sit about 100 feet from towers that use high pressure and heat to break down petroleum components. The employees will be moved more than a mile from the plant. Whiting is BP’s second-largest U.S. refinery behind Texas City.

BP was fined $21.4 million by U.S. regulators in September 2005 for safety violations that led to the Texas City explosion. Federal investigators blamed the 15 deaths and 170 injuries in part on office trailers that were too close to the processing unit that exploded.

BP shares rose 5 pence, or 0.9 percent, to 575 pence today in London. They have fallen 7 percent this year, compared with a 20 percent increase for Exxon Mobil. Hague-based Shell is the world’s second-biggest oil company.

To contact the reporter on this story: Joe Carroll in Dallas at [email protected]

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