HOME | Magazine | ConocoPhillips Alaska’s Westward Expansion

ConocoPhillips Alaska’s Westward Expansion

by Jan 12, 2019Magazine, Oil & Gas

GMT1 marks first development on federal lands in NPR-A

Aerial view of ConocoPhillips Alaska’s Greater Mooses Tooth 1, which produced first oil in October.

ConocoPhillips

Greater Mooses Tooth 1 (GMT1) yielded first oil in October.

“This is another milestone for development in the NPR-A,” says Joe Marushack, president of ConocoPhillips Alaska. “The GMT1 team successfully and safely executed this project in an environmentally responsible manner. We appreciate the collaboration with stakeholders from Kuukpik Corporation, the community of Nuiqsut, the North Slope Borough, and ASRC that made it possible.”

The permitting process for GMT1 began in 2013; the Bureau of Land Management (BLM) issued a permit to drill in October 2015. Funding was approved later that year and construction began in 2017, continuing through the winter of 2018. GMT1 is the first drill site on federal leases within the NPR-A. BLM, ASRC, and Kuukpik Corporation share land and mineral rights for the project, according to a ConocoPhillips release.

GMT1 has an 11.8-acre drilling pad, a 7.6-mile road, and pipeline facilities connected to Colville River Unit infrastructure. Initially nine wells were drilled at the site, though GMT1 has capacity for up to thirty-three wells, with peak gross production estimated at 25,000 to 30,000 barrels of oil per day.

However, the development of GMT1, which has opened the door for tapping oil reserves at Greater Mooses Tooth 2 (GMT2), hinged on the development and implementation of new steerable drilling liner technology.

“That is essentially the technology that we helped develop. This is the first development that has used this in the development phase,” says Shon Robinson, manager of drilling and wells at ConocoPhillips Alaska.

“It was paramount that we have it, and it has worked fantastically. We’ve drilled four wells with essentially no problems.

“We’re not the only operators that have used this system. We’re just the first one where we depended on the technology to work or it would have cost significantly more money to complete the development.”

During the exploration drilling phase of GMT1, it became apparent that Conoco­Phillips would face challenges not yet encountered on the remote North Slope.

The geological bedding, rather than laying relatively flat, was jumbled, making it unstable. It’s thought that a high-energy landslide caused enormous chunks of earth to break up and turn, with some ending up positioned nearly perpendicular to their original orientation. Over time, everything around these chunks of earth filled in, burying them—but not stabilizing them.

“When they started drilling two exploration wells, both had problems, but one had severe problems,” Robinson explains. “We happened to intersect one of those pieces of earth that had been rotated, let’s say roughly 90 degrees. So, the stresses in the earth in those circumstances have changed drastically and we were not successful keeping that well hole open because when the earth is on its side, it’s just not stable.”

Current Issue

September 2019

September 2019

Traditional drilling on the North Slope sees a drill bit boring to a certain depth before it’s removed and a metal lining is run to the bottom of the hole. Once the steel casing is run to the bottom, cement is pumped down the inside of the steel tube, out the bottom, and back up the annular space between the steel and formation. The cement combined with steel creates a stable well. As drilling progresses deeper, the process is repeated using smaller bits and steel tubes, nesting the cylinders until the desired depth is reached.

However, at GMT1, the unstable earth masses would fall in before the team had a chance to install the steel casing.

“We had similar issues with the second well,” Robinson says. “But we also saw there was oil worth chasing, and we knew it was going to be challenging from a drilling perspective.”

The steerable drilling liner developed with Baker Hughes—a full stream provider of integrated oilfield products, services, and digital solutions—allowed ConocoPhillips to drill and run the casing down at the same time.

Once at the target depth, workers are able to release the drilling gear and pull it back out, while leaving the casing in place.

Though ConocoPhillips needed to rely on the new, more expensive method of drilling at GMT1, the company managed to come in about $175 million under their initial estimate for the cost of development.

Without the infrastructure built during the development of ConocoPhillips Alaska’s CD5 site, which provides capacity to run everything back to the Alpine processing facility, GTM1 would have never gotten off the ground.

Industry Sponsor

Become an Industry Sponsor

When the original budget was drawn up prior to the oil price downturn several years ago, it carried a $900 million price tag for the development of GMT1, chasing an estimated $1 billion in gross.

“So, we had to sharpen our pencils and the project manager basically said, ‘We have to execute that project really successfully to try and keep costs down.’ The construction and logistics work had to be almost perfect,” says Natalie Lowman, director of communications for ConocoPhillips Alaska.

“And then, the costs actually went down for labor and materials by the time we were under construction. Everybody took a haircut when oil prices went to the $30s and $40s. So, basically, we were managing the project more efficiently and implementing more successful drilling techniques.”

The project ended up coming in at about $725 million.

However, without the infrastructure built during the development of ConocoPhillips Alaska’s CD5 site, which provides capacity to run everything back to the Alpine processing facility, GMT1 would have never gotten off the ground.

“After finishing the wells at GMT1 in 2019, we’re turning our focus on CD5, to which it’s connected,” Lowman says. “CD5 has been extremely prolific, way above what we anticipated in production. So, we want to capitalize on how well it’s doing and we announced funding for ten additional wells there in 2017.”

While GMT1 was the first development on federal lands in the NPR-A, CD5 was the first on Alaska Native lands.

Expected peak gross production from CD5 was 16,000 barrels of oil per day, but as of mid-2018 the field was producing about 37,000 barrels of oil per day.

“Cost efficiencies from advances in drilling and operational practices will require the right kind of operator expertise,” says Kareemah Mohamed, associate director of plays and basins research at IHS Markit. “For example, ConocoPhillips has employed learnings from its Lower 48 unconventional assets to lateral drilling in their Alaska North Slope CD5 development located in the NPR-A.”

In April, ConocoPhillips set three drilling records at CD5: the North American record for longest horizontal lateral at 21,748 feet and Alaska records for total combined lateral length at 34,211 feet and total combined footage for a well at 42,993 feet.

“We plan to continue to strive to safely unlock the energy potential of this world-class oil province for years to come and play an active role in Alaska’s economic future.”

——Ryan Lance, Chairman and CEO, ConocoPhillips

Extending past CD5 and GMT1, Conoco­Phillips is looking to move forward with the development of GMT2, following a Record of Decision issued by BLM on October 15. With a first oil target in the fourth quarter of 2021, the company is tagging more than $1 billion in costs. GMT2 is slated to host forty-eight wells, with thirty-six initial wells being drilled. Peak estimated monthly production is set at 35,000 to 40,000 barrels per day—more than GMT1.

“We see a lot of prospectivity out there [west]. Other companies have a different focus on the kind of work they want to do. But we’ve seen a lot of success out there. We’ve announced a new, very significant discovery in Willow,” Lowman says. “As we build out these drill sites like GMT1, they’re all going to be connected as we move west into the Willow development.”

ConocoPhillips announced in July that four exploration/appraisal wells drilled in its Willow prospect increased its earlier estimate of 300 million barrels of oil equivalent of gross resource to 400 million to 750 million barrels of oil equivalent.

“Preliminarily, the company estimates first oil can be achieved by 2024-2025 for approximately $2 billion to $3 billion spent over the course of four to five years after final investment decision [in Greater Willow Area],” according to a ConocoPhillips’ release. “Once first oil is achieved, the company anticipates ramping quickly to full production. Thereafter, the company estimates that an additional $2 billion to $3 billion of cumulative drilling capital will be executed over multiple years to maintain production at this facility.”

“We expect development in the basin to continue to be driven by commercial masters ConocoPhillips and Exxon­Mobil, but also by challengers Oil Search and Hilcorp,” Mohamed says. “We anticipate increased bidding activity and farm-ins as established operators expand their presence and new entrants seek to gain early mover advantage by leveraging low acreage prices to enter newly opened areas.”

At a Resource Development Council meeting in October, Marushack said that ConocoPhillips Alaska’s future outlook is strong.

In 2013, the outlook was a steady decline in production to about 100 million barrels of oil per day by 2028. However, a number of factors, including various technological advancements such as those put in place at GMT1, have flipped the trend. The company now estimates that number will climb to well over 300 million barrels of oil per day by 2028.

Other factors that Marushack said are having a significant impact on the economic turnaround are Senate Bill 21, which improved fiscal framework; comprehensive efforts to capture value from legacy fields and infrastructure; a renewed focus on exploration yielding early success; and that a company-wide focus on lowering the cost of supply has made Alaska competitive within the portfolio.

The oil production levels at GMT1 make it a profitable stepping stone in ConocoPhillips’ westward expansion, bringing more jobs to the North Slope as estimates predict a 40 percent increase in oil production from the region over the next eight years.

“We believe that the company’s Alaska plan aligns with our disciplined, returns-focused strategy, supports Alaska’s economy, and creates significant value for shareholders,” Ryan Lance, Conoco­Phillips chairman and CEO, says in a release. “Alaska provides competitive investment opportunities and will generate profitable growth from diversified investments with significant exploration upside… Our shareholders realize the advantages of ANS-priced oil, competitive cash and earnings margins from our operations, and our years of expertise and sound stewardship. We plan to continue to strive to safely unlock the energy potential of this world-class oil province for years to come and play an active role in Alaska’s economic future.”

Alaska Business Magazine September 2019

In This Issue

Out of the Mine and into the Smelter

September 2019

Mining has long been a key fixture of Alaska’s economy. On a small scale, people flock to the 49th state to tour different operations. Kennecott Mine was once a booming copper mining site and is now a National Historic Landmark, attracting tourists eager to visit the ghost town and get a feel of the Gold Rush era it once dominated.

Share This