Trans-Alaska Pipeline

ConocoPhillips is increasingly bullish about its western North Slope Alaska projects, where recent drilling has found more oil. The use of new technologies like horizontal drilling has also sharply lowered the costs of producing new oil.

Alaska is currently one of the best exploration prospects in the world, Matt Fox, ConocoPhillips executive vice president, told financial analysts in an investors’ briefing Nov. 19.

ConocoPhillips is planning to spend $15 billion to $17 billion on its Alaska projects over the next 10 years, not only on new discoveries but also new projects within existing fields on the North Slope.

That’s a lot of money, and it has caused ConocoPhillips to search for a partner to share risks. The company plans to divest 25 percent of all of its Alaska assets outside a partial ownership of the Prudhoe Bay field by 2021.

Included in the sale would be ConocoPhillips’ 100 percent holdings in the producing Kuparuk River and Alpine fields and new discoveries in the National Petroleum Reserve-Alaska in the west-central North Slope.

The capital requirement includes $11 billion for new projects planned in the existing Kuparuk, Alpine and Prudhoe fields. Separately, an additional $4 billion to $6 billion will be required for development of Willow, a major new find in the national petroleum reserve.

With all this on its plate, ConocoPhillips needs to spread its risk. Fox, the company’s executive vice president, told analysts: “We have done a good job of capturing value. We increased (our) position in the Western North Slope and in the Kuparuk with very, very reasonable acquisition costs. But going forward, to be prudent in how we balance risk it makes sense to dilute.”

“We have a prudent policy of not investing in large-scale projects with 100 percent equity, so this is consistent with our past practice. We’re pretty confident we’ll have a lot of interest in Alaska,” Fox said.

Meanwhile, company officials described new oil resources added on the slope. Mike Hatfield, president of ConocoPhillip’s North America and European operating subsidiary, said that at Willow drilling last winter done to define the extent of Willow’s reservoir has increased the recoverable resource estimate to 400 million to 800 million barrels. That’s up from 300 million to 500 million barrels projected previously, Hatfield said.

Willow’s resources could grow more.

The geologic formation is 25 miles long and 10 miles wide, and more delineation drilling is planned this winter. The company has also increased its estimated resources at Narwhal, another discovery, from 150 million barrels to 400 million barrels, again based on drilling results last winter, Hatfield said.

Production tests have also given the company confidence that the newly discovered reservoirs will produce as expected. Two horizontal well tests at Willow flowed at 2,500 barrels per day, Hatfield said. A horizontal test well at Narwhal flowed at 4,500 barrels per day

Narwhal can be developed with three-mile-long horizontal production wells drilled from existing Kuparuk field drill pads and because of hat the cost of the new oil supply is low, less than $25/barrel. A production start at Narwhal is expected in 2022.

Meanwhile, ConocoPhillips has other projects with expected startups in the next two years. These include Fiord West, a prospect in the Alpine field, will also be developed with horizontal production wells and with a startup in 2020, ConocoPhillips’ Alaska external vice president Scott Jepsen said.

Jepsen spoke in a separate briefing at the Resource Development Council’s annual conference held recently in Anchorage. GMT-2, a $1.4 billion new project in the NPR-A west of the Alpine field will be producing in 2021. Nuna, a small deposit near the Kuparuk field acquired last year by ConocoPhillips will also be producing in 2022.

Other new projects are also planned. In Kuparuk, an expansion of a viscous oil production project, North East West Sak, is on the drawing board, as is development of two viscous oil production pads in the western part of the Prudhoe Bay field, Jepsen said.

Finally, ConocoPhillips will test yet another recent find in the NPR-A, Harpoon. Three exploration wells are planned this winter at the prospect, which is southwest of the Willow project, Jepsen said. The seismic “signature” at Harpoon is similar to those at Willow and Narwhal, so the company has high hopes.

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