New ConocoPhillips oil project expected to reach peak production next year

ConocoPhillips started production ahead of schedule at its new GMT-1 project in the National Petroleum Reserve–Alaska Oct. 5 expects to reach peak production of 25,000 to 30,000 barrels per day sometime in 2019, company spokesperson Natalie Lowman said Wednesday.

ConocoPhillips is also awaiting final federal approval on a second project in the reserve, GMT-2, with construction on that set to begin next spring, the company said in an Oct. 9 press release. GMT-2, which is about eight miles southwest of GMT-1, is expected to produce between 35,000-40,000 b/d at peak beginning in 2021, the company said.

Lowman said Wednesday that two GMT-1 wells are now producing. Dudley Platt, an independent Alaska oil analyst, said Alaska Department of Revenue data is showing GMT-1 producing 5,000 barrels per day, but it is uncertain whether that includes both wells. Lowman said she was unable to confirm the production figures.

ConocoPhillips is engaged in an aggressive exploration and development program in the northwest NPR-A, a large 23-million-acre federal reserve in the western North Slope, west of the producing Alpine field.

Although only two wells are producing nine wells have been drilled so far at GMT-1 on an 11.8-acre production pad that has capacity for up to 33 wells, ConocoPhillips said in its press release. A 7.6-mile gravel road connects the site to CD-5, another production pad to the east, which is connected to the producing Alpine field on state lands east of the NPR-A boundary.

ConocoPhillips is also engaged in permitting on a third NPR-A project, Willow, about eight miles west of GMT-1, with an expected completion date of 2023 or 2024 and production of 100,000 b/d.

Alaska Gov. Bill Walker welcomed the start of operations at GMT-1. “The onset of oil production at GMT-1 is good news for Alaskans who will benefit from new jobs and increased production in the trans-Alaska pipeline,” Walker said in a statement.

“The state Department of Natural Resources played a key role in permitting this project and is working with industry, local communities, and federal agencies on other promising oil prospects in the NPR-A,” the governor said.

Although GMT-1 is located on lands owned by the federal government, Arctic Slope Regional Corp., an Alaska Native development corporation, owns 82 percent of the mineral estate and will receive that percentage of the royalty under terms of the 1971 Alaska Native Claims Settlement Act, which transferred Alaska federal lands to Native-owned corporations.

ASRC is in turn required to distribute 70 percent of its royalty share with other Alaska Native corporations and some individual Alaska Natives under sections 7(i) and 7(j) of the 1971 federal act. The state itself will receive 50 percent of the remaining federal share of royalty under terms of the 1975 federal law transferring administration of the petroleum reserve from the U.S. Navy to the U.S. Bureau of Land Management.

ASRC’s share of revenue from GMT-1 will be shared with Alaska Native corporation shareholders throughout Alaska under 7(i) and 7(j) of the Alaska Native Claims Settlement Act. A portion of the federal royalties will be redistributed to the NPR-A Impact Mitigation Fund for the benefit of impacted North Slope communities.

NPR-A was originally created in 1923 as Naval Petroleum Reserve No. 4, at a time when the U.S. Navy was shifting from coal to oil-fueled ships and the government was engaged in establishing potential sources of oil for strategic reserves. Exploration began after World War II under the Navy and later the U.S. Geological Survey but no commercial-scale resources were discovered until leasing to private companies began in the 1980s.

GMT-1, GMT-2 and now Willow are the first discoveries planned for commercial development.