Also adding to the loss were falling natural gas prices that hurt BP's shale investments and two refineries that have lost value.
The news for BP investors sounded bad, with the company on Tuesday reporting disappointing results across the board, according to Peter Hutton, an oil analyst with RBC Capital Markets in London cited in The Times story.
"BP is writing off a combined $2.1 billion on shale gas acreage because of lower natural gas prices, as well as a project called Liberty on the North Slope in Alaska that BP invested in but then recently halted because of environmental and other concerns. The remaining $2.7 billion is a write-down on the value of BP’s U.S. refinery system. The company is trying to sell two of its U.S. refineries, including a giant one in Texas City, Texas, and has come to realize from other sales that they are not worth the value it had on its books," the newspaper reported.
In Alaska, the technically difficult Liberty project a few miles off the Beaufort Sea coast has been beset by challenges, in part because of the plan's complexity. From a 32-acre gravel island, the company had hoped to drill two miles into the seabed then horizontally for six to eight miles to reach oil, the longest "extended reach drilling" attempt in history. The company hoped to strike a reservoir that produced 40,000 barrels of crude daily.
But delays have been caused by BP's massive Gulf of Mexico spill in 2010 -- which continues to cost BP large chunks of cash -- as well as increased scrutiny from federal and state regulators and conflict with Houston-based Parker Drilling over the unique rig the company was supposed to provide. Finally, this year, BP said the project doesn't meet the heightened safety criteria it instituted after the Gulf spill.
Second-quarter results were far better for Alaska's other major oil player, ConocoPhillips. Conoco reported huge profits in Alaska -- $551 million -- in the second quarter. Companywide, Conoco booked a $2.27 billion profit.
What's next for BP at Liberty?
The company has notified federal regulators, the governor's office, the North Slope Borough and others that its "returning to what I would characterize as its original option of a gravel island," Jeffery Loman, deputy regional director of the Bureau of Ocean Energy Management in Alaska, told the Alaska Dispatch last week. A formal plan, however, has not been submitted, he said.
BP spokesman Brett Clanton told the Dispatch Tuesday that the decision to halt the Liberty effort in its current form came after an 18-month review that included a look at the project's economics, risk, rig system and regulatory framework.
The company is talking with regulators about the project's potential next phase, he said, but he did not provide details on what that phase will consist of.
Contact Alex DeMarban at alex(at)alaskadispatch.com