BP Plc ( BP - Analyst Report ) has decided to suspend its ambitious offshore oil project in Alaska owing to prohibitive costs and technical setbacks.

Following an 18-month company review, the British behemoth concluded that the project cannot be pursued as planned. BP said that the venture would have taken longer than planned to commence production, which was initially slated for 2011.

BP’s Liberty offshore oilfield is located four miles off the northern coast of Alaska in Foggy Island Bay in the Beaufort Sea. The $1.5 billion Liberty project was anticipated to generate 40,000 barrels of oil a day with a recoverable oil reserve of 100 million barrels. Field production was anticipated to last for 20-40 years.

Earlier, BP had stated that Liberty would set standards for Arctic oilfield development being the primary oilfield located exclusively in Federal waters offshore Alaska. As per Reuters, the U.S. Bureau of Ocean Energy Management has nonetheless confirmed that BP had informed the regulatory authority about its intention to redesign the development plan.

Notably, this project has been in the news for years for reported delays and technical glitches. The first well of the Liberty oilfield was discovered by BP in May 1997. A plan − initiated way back in 1998 − for the development of the offshore field was put on hold in 2002 due to cost overruns. In 2007, a redesigned plan was proposed to the Federal regulator, Minerals Management Service. Representatives of the North Slope Borough and other local organizations considered the plan as innovative and began construction work in 2009 at Endicott for Liberty development.

However, the disastrous oil spill in the Gulf of Mexico in 2010 held back the Liberty project. It called for a fresh inspection of the project, amid regulatory changes and rig-design problems already hindered by delays.

BP holds a Zacks #4 Rank (short-term Sell rating). Longer term, we maintain our Neutral recommendation on the stock. It faces competition from oil majors like ExxonMobil Corporation ( XOM - Analyst Report ) and ConocoPhillips ( COP - Analyst Report ) .