New oil projects on slope begin to lift production

North Slope production is starting to see the benefit of new projects going into operation, according to Alaska Department of Revenue production data. The gain is still small but it will grow through the year.

More oil being produced combined with higher crude oil priced will mean more revenue for the state treasury this year and next.

Total production in February averaged 501,266 barrels per day in February, up from 499,972 barrels per in December and from 495,076 barrels per year-over-year from February 2021.

The effect of new production from two new ConocoPhillips projects, GMT-2 in the National Petroleum Reserve-Alaska and Narwhal, south of the Alpine field, was seen in Alpine field production data.

The two projects are near, but not in, the Alpine field but the new oil is processed in in Alpine field facilities and metered there.

Alpine field production is seeing a gradual increase, averaging 54,720 barrels per day in February, up from 53,007 barrels per day in January and 50,389 barrels per day year over year, from February 2021.

The increase in the Alpine field along with higher production in the Prudhoe Bay field was enough offset a continued decline in Kuparuk River field, which averaged 106,801 barrels per day in February, down from 108,867 barrels per day in January and from 117,034 barrels per day in February 2021.

The small Lisburne field, where oil from several small nearby accumulations is processed, is holding generally steady at 20,733 b/d in February against 21,274 barrels per day in January and 21,873 barrels per day year-over-year from February 2021.

Production at the Prudhoe Bay field, largest on the North Slope, continued to show increases in February. Prudhoe output was 319,013 b/d in February compared with 316,825 barrels per day in January and 305,780 barrels per day year-over-year in February, 2021.

Energy is the field operator at Prudhoe Bay and has engaged in an aggressive redevelopment of the aging field since taking over as operator in mid-2019 from BP.

Hilcorp would not comment on its operations but Alaska’s Commissioner of Natural Resources, Corri Feige, said in an interview that one strategy used by the company is increasing capacity utilization of processing plants, which allows for more oil to be processes and shipped to nearby Pump Station One of the Trans Alaska Pipeline System.

Hilcorp itself, in earlier briefings to industry groups, has said that an aggressive schedule to repair older out-of-service wells and restore production has paid benefits.

Hilcorp has a strategy of buying mature fields, investing in redevelopment and increasing production. It did that with 50-year-old offshore platforms in Cook Inlet, in south Alaska, after purchasing the fields in 2012 and 2013, and is now following a similar path at Prudhoe Bay.

State officials expect overall North Slope production to gradually increase through 2022 as output ramps up at GMT-2 and Narwhal. Another project, Fiord, is due to begin production in 2022 but is behind schedule due to technical problems encountered in drilling extended horizontal production wells, some of them seven miles from the surface location of the drill rig.

Feige is also upbeat about larger new projects planned for the slope. In the interview she said she expects Pikka, one of two larger projects, to be ready for a Final Investment Decision in the second quarter of this year.

Pikka’s phase one, if it proceeds, would produce 80,000 barrels per day beginning in 2025.

Pikka is being developed by Oil Search, now a subsidiary of Australia-based Santos Ltd., and Madrid-based Repso. Oil Searh holds 51 percent of Pikka and is operator, with Repsol as minority owner at 49 percent.

The commissioner said expects the project would expand in two 40,000 b/d increments to its expected full output of 160,000 b/d.

Feige also said ConocoPhillips Is making progress in clearing obstacles with its planned Willow project in the NPR-A west of Alpine. Willow is now stalled by lawsuits brought by environmental groups but negotiations have been underway with the U.S. Bureau of Land Management, which administers the petroleum reserve, on revised plans for the project to meet objections raised by the litigants.

BLM has announced that it will publish a new Supplemental Draft Environmental Impact Statement for the project by mid-year, which could set the stage for approvals of permits for the project.

ConocoPhillips had hoped to have a Final Investment Decision on Willow this year and production in 2025 or 2026 but is now saying the project will start up about six years from an FID, whenever it happens.

The company has also said that Willow’s estimated cost is now $8 billion, up from earlier projections of $6 billion.