North Slope oil project approved

ConocoPhillips has approved its GMT-2 oil project on the North Slope and construction will begin this winter, company officials said Friday.

“We have approved GMT2 for funding. decision was announced in ConocoPhillips’ earnings call,” with investment analysts on Thursday, company spokesperson Natalie Lowman said.

“We are planning to lay gravel for the project during the first quarter of 2019 and to order long-lead time materials,” or components that take time to manufacture, Lowman said in an e-mail.

Final engineering complete are detailed engineering is underway, said.

GMT-2 is in the northeastern part of the National Petroleum-Reserve Alaska and is eight miles west of GMT-1, ConocoPhillips’ first project in the NPR-A, which recently started production. The new project is expected to produce between 35,000 barrels per day to 40,000 barrels per day beginning in 2021.

The company will build a 14-acre production pad and an access road and pipeline, both about eight miles in length, connecting GMT-2 and GMT-1.

GMT-1 itself is connected by road and pipeline to CD-5, a producing satellite production pad which is connected by pipeline to the Alpine oil field on state lands east of the Colville River, the eastern boundary of the NPR-A.

“The project could generate about 700 jobs, the peak estimate, during two of three winter seasons beginning in the winter of 2019/2020,” Lowman said.

GMT-2 production royalties will be split between the federal government and the state of Alaska with a small portion going to Arctic Slope Regional Corp., which owns a portion of the mineral rights. ASRC is the Alaska Native development corporation for the North Slope.

In contrast, most of the GMT-1 and CD-5 production royalties are going to ASRC because the corporation’s land selection rights under the 1971 Alaska Native Claims Settlement Act, or ANCSA, allowed it to select much of the subsurface rights.

However, ANCSA requires ASRC to share 70 percent of its royalty revenue with other Alaska Native regional and village corporations.

With work on GMT-2 underway and GMT-2 in production, ConocoPhillips is now engaged in planning and permitting for Willow, a third and larger NPR-A project that is about eight miles further west.

Willow is expected produce about 100,000 barrels per day and will require its own “stand-alone” oil and gas processing facilities in the field, in contract to GMT-1 and GMT-2, as well as CD-5, where unprocessed fluids, mixtures of oil, gas and water, are shipped to the Alpine field process plants.

Each of these projects represent major extensions of infrastructure extending west in increments into the petroleum reserve. Each extension of infrastructure helps make other oil discoveries, economic to develop.

The national petroleum reserve is a large, 23-million-acre federal land tract that covers much of the western North Slope. It was created in 1923 as a potential oil reserve for the U.S. Navy although exploration did not begin until after World War II.

Over several decades the exploration, done by federal agencies, was mostly unsuccessful although a small oil field was found at Umiat, on the southeastern boundary of the reserve, and a small gas field was discovered near Point Barrow, in the north. The gas field now supplies gas to the community of Utqiagvik (formerly Barrow).

Commercial-scale discoveries were made only in recent years, and after the federal government began leasing to private companies. These are now the three projects being developed by ConocoPhillips.