There are bumps in the road, like Willow, but ConocoPhillips is pushing ahead with an aggressive North Slope development strategy with a plan for its Alpine field facilities to become a regional hub for new projects.
The company is on track with a billion-dollar capital investment program this year even with Willow being delayed, said Vincent Lelarge, ConocoPhillips’ North Slope development manager.
Through the third quarter of 2022 capital expenditures have totaled $698 million, Lelarge told the Resource Development Council at its annual conference in Anchorage.
New projects in advanced development include GMT-2 in the National Petroleum Reserve-Alaska and Fiord West in the Alpine field. Initial production is to begin in 2022 from Narwhal (see separate article).
Also on the radar is Nuna, an undeveloped deposit near the Kuparuk field, although no timeline has been given.
Assuming legal issues with Willow are resolved, ConocoPhillips has a number of NPR-A prospects in the immediate area – West Willow, Harpoon and Bear – that could be tied into the planned Willow processing facility and pipelines.
On GMT-2, facilities and pipelines were installed ahead of schedule. Eleven modules have been moved into place and 14 acres of pad have been built after 600,000 manhours of construction. Total investments in GMT-2 are about $1 billion.
Fiord West, a second project under development, is now expected to begin production by second quarter 2022. The field is being developed with long horizontal wells being drilled by Doyon 26, a heavy rig designed for extended-reach horizontal drilling.
The first well is requiring over 36,000 feet and later wells planned will be 40,000 feet in length. “These are long, complicated wells,” Lelarge said.
Lelarge said a production test has been conducted with results that were better than expected. “We’re confident we’ll have first oil by the end of the year,” he said. GMT-2 is expected to produce 30,000 barrels per day at peak.
North Slope projects like those in NPR-A are typically expanded over time. For example, CD-5, a project near the Alpine field, began production several years ago with 15 wells. Those are now doubled to 30, Lelarge said.
Work is also continuing on West Sak, the vicious oil project in the Kuparuk River field that is being expanded in increments over several years. The latest at West Sak is the drilling of a long 8,000-foot lateral “sidetrack” well with a coiled-tubing rig.
Coiled-tubing rigs are mobile drilling units that work with drilling motors at the end of long flexible tubes (coiled at the surface, hence the name). They are used to drill sidetracks, or lateral wells, from an older “vertical” well to the surface drilled originally with a conventional rotary drill rig.
Coiled-tubing drilling much less expensive than drilling with a conventional rig and can develop small oil deposits that are otherwise uneconomic. It is one of three technology innovations invented on the North Slope that are important, the other two being horizontal production wells and multi-lateral wells, where several lateral wells are drilled underground from a vertical well to the surface.
Over 200 coiled-tubing wells have been drilled to date in the Kuparuk field and far more with coiled-tubing wells drilled in Prudhoe Bay.
On Willow, Lelarge said the company remains committed to the estimated $6 billion project. “We are working through the issues raised in the U.S. District Court decision with the U.S. Bureau of Land Management,” he said, after an adverse court ruling in a case brought by tribal and environmental groups.
The company is still planning for a Final Investment Decision next year. If developed, Willow would produce 160,000 barrels per day. The deposit now has an estimated 600 million barrels of recoverable reserves.
ConocoPhillips sees a bright future for the North Slope but Lelarge cautioned that costs are still high relative to other places the company is working.
Per-barrel production costs amount to about $25 per barrel, which includes $18 per barrel of direct “lifting” costs at the field and $7 to $8 per barrel in pipeline and tanker transportation costs.
That is about double the worldwide average. Within the U.S. the average per-barrel production cost is about $7 per barrel industry-wide.
Alaska producers must compete internally for capital meaning, in ConocoPhillips’ case, other regions where the company is active. But firms in Alaska must also attract investment from other capital sources, Lelarge said.
That is becoming more challenging, he said, with banks and equity investors increasingly concerned with political risks facing Arctic projects, mainly because of climate change.