Officials broke ground on Thursday for the first phase of the $50-million scheme to erect new offices for Bermuda insurer, EXEL Ltd. at the five-acre site of the old Bermudiana Hotel.

The site was split down the middle by EXEL and ACE Ltd., with the former taking the eastern half and beginning development for EXEL House.

The one rather expensive hiccup for EXEL was the finding of oil on the site, which had to be salvaged and removed. That unanticipated problem alone could push up costs by nearly a million dollars.

Oil remediation work is being undertaken by specialists J.A. Jones Environmental Services and should be completed by the end of the month.

Workmen began pulling down the remnants of the old hotel last July, before work began on the foundation of the new complex in September. At the anticipated height of construction, officials expect more than 100 workmen on the site.

EXEL is presently occupying office space in four locations and is anxious to consolidate operations at one site.

EXEL president and CEO, Brian O'Hara, conceded, "We knew right away that we had to get moving on constructing our new office buildings because of our need for office space.

"We were very disappointed when the oil was found, which consumed time and caused delays. It's taken an additional six months as a result of that. So I'm feeling great relief now that we are actually going ahead.

"In the first phase, we're laying a foundation and building a two-level underground car park for our two buildings. The first building is to be about seventy-to-eighty-thousand square feet. The second might be a little larger, because it will be more utilitarian.

"Given the growth we are experiencing we might proceed with the second building sooner, rather than later. The merger with (Bermuda reinsurer) Mid Ocean has prompted that thinking.

"The $50-million price tag is a guess, because you never really know for sure.'' The EXEL development is scheduled to be completed by late in the year 2000.

The excavation is nearly completed and by mid-May, construction should begin on the foundation and basement car park. That work alone, being done by D&J Construction is estimated to cost $12 million and will take a year to complete.

The design team comprises Entasis Architecture and Murdoch Design Services, with local engineering support provided by Woodbourne Associates.

Awards have also been made to Bermuda Air Conditioning Co. Ltd. for mechanical installations, Universal Electric Ltd. for electrical installations, and to Otis Elevator Co. for elevator installations.

Final design drawings for the phase one superstructure are expected to be available by May 8 to enable negotiations to commence with the successful basement contractor.

Entasis director Ted Wood said, "With the oil remedial work, we had to dig much further down than we wanted, down to near water-level to skim off the oil and then back-fill it in a very carefully compacted way, before laying the foundation.''