ConocoPhillips fired up about Alaska prospects in 2018

ConocoPhillips is pretty bullish about oil prospects on the North Slope.

The company’s Alaska president, Joe Marushack, told a major business conference in Anchorage last week that he sees a possibility for up to 400,000 barrels a day of new oil coming into the Trans Alaska Pipeline System over the next few years.

This would come from new oil projects that companies are working on including three by ConocoPhillips, Marushack said at an Anchorage Economic Development Corp.’s economic forecast luncheon held Feb. 1 at the Dena’ina convention center in Anchorage.

Getting new oil into the oil pipeline is important because it is now carrying about 500,000 barrels per day, about one-fourth of its 2 million barrel-per-day design capacity, and if the oil “throughput” in TAPS drops further there would be operating problems , according to Alyeska Pipeline Service Co., the pipeline operator.

Marushack cautioned that new oil on the slope wouldn’t come all at one but in increments over several years as companies complete projects and ramp up production. State officials also point out that the decline of production in the large older producing fields will likely continue, so the effect of new oil will be mainly to keep overall slope production level.

The state’s long-term production forecast, which includes assumptions of new production from the projects Marushack mentioned, is for continued production at about 500,000 barrels per day on the slope. In the long term, new discoveries in the Arctic National Wildlife Refuge, in NPR-A or offshore, could boost this, however.

Marushack told the AEDC here are also possible adverse developments that could dampen things, such as a flood of new oil coming on the market from U.S. shale oil or Middle East producers, or the Alaska Legislature raising taxes on its oil producers.

A bill to raise taxes had already been introduced in the Legislature and hearings are underway in the House Resources Committee in Juneau. The bill, sponsored by Democratic Reps. Geran Tarr, and Andy Josephsen of Anchorage, would increase the state’s minimum production tax rate from four percent to seven percent on gross revenues.

“That amounts to about a 75 percent increase,” Marushack said.

ConocoPhillips’ three new projects are in the National Petroleum Reserve-Alaska, a large 23-million-acre federal reserve on the western North Slope west of the existing oil fields in the central slope, which are on state lands.

They include GMT-1, a project now in final construction that will begin producing later this year, GMT-2, a separate deposit a few miles southwest of GMT-1 in the federal reserve, and Willow, a new discovery a few miles further southwest of GMT-2. While GMT-1 is in construction, ConocoPhillips is still working on permits for GMT-2 and has yet to approve construction, and Willow is in its early permitting phase. ConocoPhillips also plans new exploration and delineation wells around Willow this winter to better define its reserves.

The company believes Willow could produce up to 100,000 barrels per day. There is more confidence in what GMT-1 and GMT-2 can produce, about 25,000 barrels per day each.

Marushack mentioned development work underway by independent companies like Armstrong Oil and Gas and its new partner, Australia-based Oil Search on their “Pikka project, and Repsol, a major Spain-based company, is a partner with Armstrong and Oil Search in the Pikka.

Caelus Energy hopes to develop its small “Nuna” development, and Brooks Range Petroleum, a small Alaska-based company, hope to have “first oil” later this year from its small “Mustang” project that lies between the Kuparuk River and Alpine fields west of Prudhoe Bay.

Hilcorp Energy is meanwhile developing new oil production from the existing Milne Point field, north of Prudhoe Bay, and is in advanced permitting at Liberty, a deposit in shallow offshore water east of Prudhoe. Cook Inlet Energy, which operates the small Badami field east of Prudhoe, is working to develop more production there.

If Armstrong, Oil Search and Repsol press the “go” button on Pikka, the field could be producing 120,000 barrels per day in a few years. Nuna would produce about 25,000 barrels per day if Caelus proceeds with construction, the company has said. Mustang will produce about 12,000 barrels per day, Brooks Range said.

Companies are exploring for more oil, too. Eni Oil and Gas, which operates the producing Nikaitchuq field northwest of Prudhoe Bay, is drilling this winter on a long, “extended reach” exploration well that is being drilled laterally several miles north of the Alaska Beaufort Sea coast to test for new oil deposits.

ConocoPhillips itself is exploring for more oil this winter in an area south of the Alpine field. Arctic Slope Regional Corp. is also reported to have a discovery at its “Placer” prospect near the Mustang field.