ConocoPhillips bucking low oil prices with increased exploration

ANCHORAGE — Defying lackluster crude oil prices, ConocoPhillips is planning an aggressive North Slope exploration program this winter.

“We are currently considering up to a five-well winter exploratory drilling program in 2018, four wells in the National Petroleum Reserve–Alaska and one well on State of Alaska acreage, subject to final budget and permit approvals,” spokeswoman Amy Burnett said.

At least one other exploration well is planned by Armstrong Oil and Gas. Most of the work is focused on the western North Slope near where recent discoveries have been made by ConocoPhillips and Armstrong.

The drilling will result in several hundred jobs on the rigs and support services. In addition, ConocoPhillips will continue construction on its GMT-1 project for the second winter, employing about 700, according to the company.

All together, this will be a welcome boost for the state’s oil support and services industry, which has been hit hard by the cutback in drilling and other North Slope work due to low oil prices.

In the petroleum reserve, the drilling would better delineate reserves at Willow, a discovery announced last January by ConocoPhillips, Burnett said. The company would also test two other, separate prospects.

“Three wells would better define the Greater Willow Area, one would target potential new resources southwest of Nuiqsut (an Inupiat village in the Colville River region, “and one is the Putu well in the 5th Expansion Area, Colville River Unit,” Burnett said.

“We’ve also submitted permits for a seismic program on state leases issued in July this year,” she said in the e-mail.

Willow is in the northeastern part of the 23-million-acre petroleum reserve and is about 30 miles west of the producing Alpine oil field, which is operated by ConocoPhillips. The company previously said it believes Willow could produce up to 100,000 b/d if its reserves meet expectations. The project is still in the resource definition and preliminary planning phase, with no schedule set for permit applications, ConocoPhillips has said previously.

Willow is near two nearby smaller projects now being developed by the company. One is GMT-1, about 10 miles west of the Alpine field, which is being constructed and is to begin production in late 2018 with a peak rate of 30,000 barrels per day. The second is GMT-2, about 10 miles west of GMT-1, which is in an advanced planning stage. GMT-2 is expected to produce about 25,000 barrels per day at peak.

ConocoPhillips’ two other new exploration wells, Putu and the one southwest of Nuiqsut, are in an area where Armstrong Oil and Gas, a Denver independent working with Repsol, announced new discoveries in March.

The western North Slope has become a hot new Alaska exploration play despite the slump in crude oil prices. ConocoPhillips has been engaged in a steady exploration program in the petroleum reserve for several years, working with a minority partner, Anadarko Petroleum Corp.

That effort has resulted in the GMT-1, GMT-2 and the recent Willow discoveries.

Meanwhile, Armstrong Oil and Gas and Repsol have been exploring on state lands in the Colville River area near the Alpine field and announced their “Pikka” discovery, which is now in development planning. Potental production is estimated at 120,000 barrels per day.

Armstrong and Repsol, and now ConocoPhillips, are drilling these prospects in the Nanushuk geologic formation, which has long been known to contain oil but was previously considered uneconomic. The companies now believe they can apply new production techniques, including multi-stage fracturing, to unlock the oil.

The discoveries are near existing pipeline and road infrastructure built to serve the Alpine field, which means they can be developed without bearing the expense of major new infrastructure.

In a separate development, Dallas-based Caelus Energy discovered oil at Smith Bay, an offshore discovery on state submerged lands in shallow waters north of the NPR-A. Caelus believes the discovery to be significant, capable of possibly producing 200,000 b/d, but said further testing is needed.

Also, the area is remote, about 100 miles northwest of the Alpine field, which means major investments in a pipeline and road will be necessary.

Additional drilling was planned this winter at Smith Bay but the work has been delayed, Caelus said earlier this year.