Champions of Thunder Horse have little to cheer

When BP produced the first oil from Thunder Horse, its flagship project in the Gulf of Mexico, the company threw a barbecue.

The Thunder Horse platform was supposed to begin producing in January 2005, but was delayed three years by a string of engineering problems. However, in spite of the thrill of having achieved first oil on June 14, the mood at last week’s celebration was sombre.

“It was like a wet fire cracker,’’ one employee said. “The table decorations were generic; the sound system poor; the handouts were cheap – leftover water bottles and Timex watches with the Thunder Horse logo; and the noon to 3pm function broke up just after 2pm, when everyone disappeared.”

The barbecue was in stark contrast to previous team events, which have featured morale-boosting efforts such as a rousing film and give-away T-shirts bearing the logo “Let the thunder roll”.

Dan Replogle, vice-president of Thunder Horse, had sent an e-mail to staff inviting them to celebrate, but adding a note of caution: “We will, undoubtedly, face new challenges in the months ahead.”

Thunder Horse is a showcase project for Tony Hayward, BP’s chief executive: a symbol of the improvement in the company’s operational effectiveness he hopes to bring about after the succession of problems under his predecessor Lord Browne. Mr Hayward has set a target of bringing the project on stream by the end of the year. Failure would be a blow to his credibility.

The problems at Thunder Horse pre-date Mr Hayward’s tenure as chief executive, although he had responsibility for the project as head of exploration and production from 2002.

BP has told investors that Thunder Horse will be the biggest field in the Gulf, with production estimates of 250,000 barrels of oil and 200m cu ft of gas a day.

Yet, in the past few years, the project has suffered welding problems that forced BP to pull up the subsea infrastructure; backwards valves that allowed water to enter buoyancy tanks during Hurricane Dennis, causing the platform to list precariously; and the discovery that more than 100 anodes, anti-corrosive metal structures weighing up to 700 pounds each, had dropped off or required removal from the platform.

Then, as BP geared up to start the initial four wells that were planned to bring the field to production last month, the Financial Times learned it had discovered problems with three of them.

“Rarely does a project go off without a hitch, but this is not normal,’’ said Kenneth B Medlock III, fellow in energy studies at the James A Baker III Institute for Public Policy. He said: “This sort of news will not be taken well by the market. I think what we are seeing is the result of an industry that is stretched to its limits in terms of qualified personnel, expertise and resources.”

Each well could take up to 30 days to repair.

Thunder Horse workers are well aware of the difficulties.

“You always have time to fix it when you screw it up, but you never have enough time to do it right the first time,” an employee said. “This has been the theme running through the project.’’

The feeling among workers is that BP will probably get the four wells repaired and operational by its latest year-end deadline. Even then, however, Thunder Horse’s problems will not be over.

BP points out that Thunder Horse, which stands in 6,000 feet of water, is a large and complex project.

“While commissioning some of the wells, we encountered problems with some industry-standard equipment that we will repair,” the company said. “We have time in the schedule to resolve these issues and the project remains on schedule.”

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Copyright The Financial Times Limited 2008