Anadarko Petroleum Corp. (APC) said its Caesar/Tonga deepwater oil development project in the Gulf of Mexico will begin producing later than expected because testing has found equipment unfit for service.

Deepwater drilling has come under closer scrutiny since the deadly April explosion of BP PLC's (BP, BP.LN) Deepwater Horizon well and the subsequent environmental disaster in the Gulf of Mexico . Nevertheless, the industry continues to pin expectations of future profits on such projects.

Anadarko said Monday that testing of a production riser system "preclude it from being put into service on this project." The company had expected the project to begin producing in mid-2011. It said the setback won't affect its ability to meet its current-year sales volume target.

Anadarko operates the development and has a 34% stake. Co-owners include Statoil ASA (STO, STL.OS), Royal Dutch Shell PLC (RDSA, RDSA.LN) and Chevron Corp. (CVX).

Anadarko shares closed Friday at $74.18 and were inactive in recent premarket trading.

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