Far From Tapped Out
2019 sees renewed vigor on the Slope
ConocoPhillips’ Alpine field. The company plans for GMT2 to connect to the Alpine production center for processing via GMT1 and CD5 infrastructure.
Making predictions about when an oilfield will come online and how much oil that field will produce is an inexact science at best. The number of factors involved in successfully finding and extracting oil from start to finish is countless. Oil and gas exploration is dependent on climate, price volatility, budgetary restraints (both state and corporate), land access, permitting, safety requirements, technology, and… shall we go on? While it’s close to impossible to say exactly how much oil will come from the North Slope in the coming years, it’s roundly accepted the state will see a major uptick in activity in the region thanks in part to The More Alaska Production Act, also known as SB 21, which has drawn billions of dollars in new investment to Alaska over the past several years, causing Alaska’s major oil and gas players (and some newcomers) to invest their faith and money in the Alaska Arctic with new and ongoing projects.
ConocoPhillips increased its budget for its Alaska operations from $900 million last year to $1.2 billion this year, or about 20 percent of its total planned 2019 capital expenditures of $6.1 billion, reflecting “higher activity and higher working interest in existing fields and further exploration activity focused on appraising the successful Willow discovery,” the company reports. The Willow prospect—located in the Bear Tooth Unit in the northeast portion of the National Petroleum Reserve-Alaska (NPR-A)—is expected to produce 100,000 barrels of oil per day (bopd) with first oil anticipated in 2024-2025.
The company is also developing Greater Mooses Tooth 2 (GMT2) following successful production last year at Greater Mooses Tooth 1 (GMT1) also located in NPR-A. The company expects GMT2 to produce 35,000 to 40,000 bopd via thirty-six initial wells, which may increase to forty-eight, at a cost of less than $1 billion, according to a company fact sheet. Plans call for GMT2 to connect to the Alpine production center “for processing via GMT1 and CD5 infrastructure.” First oil at GMT2 is planned for late 2021.
Hilcorp Energy is developing its Moose Pad prospect in the Milne Point field. This marks the first new pad at Milne Point since 2002 and will be home to fifty wells, according to a presentation given to the Resource Development Council by David Wilkins, senior vice president of Hilcorp Alaska. Facility construction was 86 percent complete in late 2018 and the pad was set for first production in January of this year. The company expects peak production of 16,000 bopd of viscous oil by 2021. The Milne Point field is owned by Hilcorp and BP in a 50/50 partnership and operated by Hilcorp. Hilcorp is using polymer flooding to help push more thick oil out of the ground, resulting in higher yields. In total, Moose Pad represents a $400 million investment that will result in recovery of 60 million barrels of oil, according to the company. Hilcorp expects Milne Point to be producing 35,000 bopd by the end of this year.
Oil Search, a relatively new player in Alaska, is developing the Pikka Unit in the Nanushuk formation. The company says Nanushuk will be a major area of development on the North Slope starting with Pikka, which it expects to produce approximately 620 million barrels of oil. The Pikka Unit is being purchased from Armstrong Energy in two increments; half was bought for $400 million in 2018 and the remaining $450 million is set to be paid before June. Oil Search is targeting first oil from the Pikka Unit in 2023 from two drill sites: Pikka B and Pikka C. The company, which commenced its first drilling operation in December 2018, said in an April release the winter drilling season “met or exceeded expectations for planning, safety, drilling, subsurface data gathering, and overall performance” with confirmation of well deliverability. It went on to say in Pikka C—which was spud in February—flow rates were impacted by well clean-up and mechanical issues, but “sufficient data was acquired from the well to support its pre-drill expectations.” Pikka B was spud in January.
Overall, Oil Search (operating in state as Oil Search Alaska) says it expects development will meet or exceed its project forecast. The company continues to advance its plans through permitting and cooperation discussions with other North Slope operators.
“The results of the drilling are in… Alaska represents an excellent start to 2019, which promises to be an exciting year,” says Peter Botten, managing director at Oil Search.
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BP Alaska spent part of the winter season conducting a 3D seismic survey of about 400 square miles of Prudhoe Bay to identify any small pockets of oil that may have been overlooked and could help extend the life of the oilfield for “another forty years.” The company conducted the survey during about a four-month period ending in mid-April using machinery that creates sonic energy waves that echo off rocks thousands of feet below the ground’s surface, returning to data receivers that differentiate the types of sound waves based on the type of rock they bounce off of.
Pantheon Resources, another Alaska oil and gas newcomer, in April announced it completed flow testing operations at the Alkaid well, acquired from Great Bear Petroleum in January of this year. Alkaid was drilled as a vertical test well in 2015 but was not flow-tested due to massive flooding in the region and was subsequently suspended. Pantheon resumed field operations after acquiring the assets from Great Bear Petroleum with the objective of gaining an “understanding of the geological and geophysical properties of the play and to assess the potential commerciality of the three targeted zones.” Pantheon saw successful flow test results at its primary target, the Brookian Formation in the Alkaid well, which confirmed the well as an oil discovery; however, flow testing operations at the shallower West Sak and Ugnu secondary targets found brackish water, resulting in Pantheon downgrading the probability of success in both secondary targets.
Future development wells at Alkaid will be horizontal, stimulated, and perforated over larger intervals which Pantheon says will deliver significantly larger production rates than April’s flow rate of 80 to 1,000 bopd of light oil. The company applied to the state to suspend and freeze the wellbore for use as a future development well and producer.
“Despite [the] news on the secondary targets, Alkaid has been a great success for Pantheon, exceeding our expectations in the primary target, and upgrading the adjoining Phecda prospect which appears analogous on seismic… Our decision to apply to the State to suspend and freeze protect Alkaid now was impacted significantly by the ‘brackish water’ produced in the West Sak and also by the recent exceptionally warm weather on the North Slope. It is imperative to preserve the Alkaid discovery well for future production. The Alkaid success provides ongoing confidence on future drilling operations where the high tech geophysics applied to Alkaid can be replicated across the entire portfolio and deliver material success, as has been the case with other operators chasing this similar play in adjoining leases,” said Jay Cheatham, CEO of Pantheon in an April press release.
It appears that forecasters were right on the money when they predicted the North Slope would see more activity this year than in the past decade as companies from around the world look to Alaska’s oil reserves with renewed interest. North Slope production is expected to average 511,500 bopd in FY2019 and 529,000 barrels per day in FY2020, according to the Resource Development Council. Whether these projections are right on the nose or even close to accurate, there’s no doubt that the North Slope is far from tapped out.
In This Issue
Mining in 2019: The Year in Review
Following a year when metal prices were both up and down—sometimes dramatically; when international trade squabbles spooked investors to both enter and exit the metals markets; and when mining companies started the year cautiously bullish but ended it cautious bearish, those involved in Alaska mineral exploration, development, and production are once again asking themselves: “Where did we succeed, where did we fail, and where do we go from here?”