North Slope production gained in July over June; ConocoPhillips reports $687 million profit for second quarter

North Slope crude oil production showed gains in July over June due mainly to increased output from the large Prudhoe Bay field, which produces over half of the oil produced on the slope.

Total production for the month averaged 471,864 barrels per day, up from 455,342 barrels per day in June, according to monthly production data from the Alaska Department of Revenue.

Two other large fields on the slope, the Kuparuk River and Alpine fields, basically held even in July compared with June.

In a related development, ConocoPhillips reported a $687 million profit on its Alaska operations Aug. 4 for the second quarter of 2022. The company also invested $218 million in its Alaska producing assets during the quarter and is on track to invest approximately $1 billion during the year.

The company also paid $981 million in taxes and royalties in Alaska in the second quarter, which includes $771 million paid to the state of Alaska and $210 million to the federal government.

ConocoPhillips is the only Alaska oil and gas producer reporting financial information on its Alaska holdings. Other major Alaska producers like ExxonMobil and Hilcorp Energy do not disclose information on Alaska production operations.

In terms of production, the Kuparuk River field, owned and operated by ConocoPhillips, averaged 105,857 barrels per day in July, up slightly from 101,527 barrels per day on average in June, while the Alpine field, also operated and owned by ConocoPhillips, was slightly down at 51,432 barrels per day on average compared with 53,935 barrels per day on average in June. Kuparuk and Alpine are owned and operated by ConocoPhillips.

The small Lisburne field, which is actually a collection of several small separate reservoirs producing through the Lisburne processing center, was slightly down in July at and verage 18,510 barrels per day compared with an average of 19,616 barrels per day in June.

Prudhoe Bay, however, gained in July, averaging 296,034 barrels per day, up from 280,264 b/d on average in June.

Typically, summer production on the North Slope declines compared with the winter months because oil and gas processing facilities are more efficient in cold weather and handle more oil. Prudhoe Bay, which is operated by major independent, Hilcorp Energy, is countering the normal seasonal cycle.

Prudhoe performance is also up compared with July 2019, considered a benchmark year because it was before the COVID-19 pandemic and its oil market disruptions in 2020 and 2021. In July 2019 Prudhoe averaged 256,388 barrels per day on average, which is 39,646 barrels per day below the July, 2022 average.

Total North Slope production was up in July 2022 by 5,808 barrels per day compared with July 2019, the benchmark. The increase was again mainly due to Prudhoe Bay because all other fields on the slope showed continued declines, part of a long-term trend.

Hilcorp, the operator at Prudhoe, has a reputation for aggressively pursuing incremental gains in mature fields it operates through well workovers and repairs of older wells taken off line by the previous operator, BP.

The company followed a similar strategy in Cook Inlet, in south Alaska, where Hilcorp took over aged offshore oil and gas platforms from Chevron Corp and Marathon Oil in 2012 and 2013 and boosted production of oil.

New projects on the slope expected to gradually increase production. ConocoPhillip now has three smaller projects producing oil through the Alpine field facilities including GMT-2 in the National Petroleum Reserve-Alaska.

One pending development being watched closely is at Pikka, a new discovery south of the Alpine field where Australia-based Oil Search, now a subsidiary of Santos, Ltd. and Madrid-based Repsol are expected to make an investment decision this summer or early fall.

Engineering, permitting and some early construction on the project have been underway. If the Final Investment Decision is made Pikka could be producing 80,000 barrels per day an initial phase and 120,000 b/d in full development in a few years.

Another project pending is Willow, another discovery in the NPR-A now undergoing changes in project design and a new environmental review. If developed, Willow could be producing 180,00 barrels per day in late 2025 or 2026.

The new environmental review of Willow, published last month by the U.S. Bureau of Land Management, which administers the NPR-A, is now out for a public comment period which is to close in late August.

One long-term technology initiative is on potential production from the Ugnu heavy oil deposit in the Prudhoe Bay and Milne Point fields. Hilcorp is working with U.S. DOE and University of Alaska researchers on ways to commercially produce from a large resource Ugnu, which overlies the two conventional fields.

The thickness and cold temperature of the Ugnu oil has stymied attempts at commercial production to date including efforts by BP to use a mining technology adapted from Alberta tar sand.

Hilcorp is now investigating use of a mixture of solvents and miscible natural gas liquids to loosen the oil, according to sources familiar with the project. This follows a successful effort by the company to use polymers to produce viscous oil at Milne Point which may soon be applied to stimulate production of viscous oil deposits at Prudhoe Bay.

Viscous oil is of better quality and warmer than the heavy oil at Ugnu but has also posed technical challenges.