The industry prepares for winter drilling
Rig No. 1 at BlueCrest Energy’s Cosmopolitan Unit in Cook Inlet.
Fall is well underway, and with it signs that Alaska’s oil and gas industry is busy preparing for the 2019-2020 winter drilling season. Available project details indicate a winter season that expands upon last season’s successes, continued exploration in the Nanushuk Formation, and the design and implementation of new technologies to help companies better identify potential prospects and guide future exploration.
“These days companies are looking really at January [as a start date] so they can ensure the ice infrastructure will be in place,” says Graham Smith, permitting section chief with the Alaska Division of Oil and Gas. “The flood of permits, meetings, and planning sessions these days is happening more in the September/October timeframe, although we’re starting to see some applications come in August.”
Smith says that while the Division historically likes to know what projects are in the pipeline, they encourage companies to hold off on submitting permit applications until all the details are finalized.
“These projects can go through many different iterations, and in the past we’ve dedicated staff time and resources to processing permit applications only to have the company come back and say, ‘Plans changed, now this is what we’re actually going to do,’” Smith explains. “When it comes to the permitting aspect, we ask that they come in when they’re actually ready to roll.”
Anchorage Economic Development Corporation President and CEO Bill Popp says the short-term outlook for drilling this winter looks promising, even though the state won’t see an immediate financial benefit.
“I think we’ve got some things to be optimistic about in terms of increased activity, but it’s going to be awhile before that impact has any impact on the state treasury,” he says.
Even without official permits in the pipeline yet, Smith anticipates “several projects to be undertaken by ConocoPhillips, BP, and Hilcorp intended to maintain and upgrade North Slope facilities,” as well as projects from geophysical exploration companies.
Oil Search Alaska
Oil Search’s winter program includes maintenance and development projects in the Nanushuk field, part of the Pikka Unit Development Oil Search acquired in 2018, along with satellite fields within the Nanushuk and Alpine Fairways and the Horseshoe discovery. The project is located roughly seven miles northeast of Nuiqsut and fifty-two miles west of Deadhorse, according to documents filed with the Division over the summer.
“They are definitely in execution mode,” Smith says. “They’ve recently submitted a plan of operations, which will include a processing facility, pipelines, roads, and other facilities and infrastructure. So that’s a pretty exciting project that’s going to get started this winter.”
Prepacking and construction of ice roads and pads, placement of temporary construction camps, and construction of roads and pads is expected to begin November 1, according to filed documents, with an estimated 80 to 100 miles of ice roads scheduled to be built during the 2019-2020 winter season. The roads will be wide enough to accommodate two-way traffic, drill rig access, and other traffic, with a 12-inch average thickness.
In terms of drilling projects, Oil Search spokesperson Amy Burnett says the company is planning a two-rig program, but as of August had yet to finalize the number of wells or the rig locations. Oil Search told Resource Development Council members in June that the company invested heavily in its 2018-2019 winter drilling program and will continue to invest in Alaska.
ConocoPhillips anticipates another exploration and appraisal program for the 2019-2020 winter season, according to Director of Communications Natalie Lowman. While program budgets and hiring numbers have yet to be confirmed, she says the company plans to continue last year’s appraisals and explore new prospects as well.
“We’ll continue to appraise the Willow discovery and will also plan to explore the Harpoon prospect south of the Willow discovery,” Lowman says. “In addition, this fall we’ll be drilling another appraisal well in the Narwhal trend from an existing drill site at Alpine to follow up on the promising results of this past winter.”
During its second-quarter earnings call on July 30, Executive Vice President and COO Matt Fox said ConocoPhillips is “going to have quite another aggressive appraisal and exploration season,” with details expected to be released next month. Echoing Lowman’s comments, he said the company’s winter plans will build off successes from current prospects.
“The results we’ve seen in Willow and Narwhal are both very encouraging,” Fox said. “So, we’ve really taken the opportunity to extend some of the appraisal from our existing drill sites at Alpine. For example, we’ve decided to do an extended well test on a horizon appraisal well that we’ve drilled into the Narwhal trend. The results of that well are very encouraging.” Testing will help the oil company understand long-term deliverability, while an offset injection well drilled into the producer will also help ConocoPhillips collect more information on the Narwhal trend, he added.
Drilling in Willow is focused on understanding the extent of the prospect so that ConocoPhillips can fully size the facilities, added Michael Hatfield, president of ConocoPhillips Alaska. Current plans also call for drilling several wells in Harpoon.
ConocoPhillips plans to spend roughly half of a $200 million capital budget increase to conduct additional scope in its appraisal program, including a long-term test of the Putu horizontal appraisal well, the additional Narwhal appraisal well, and additional long-lead items for the 2020 exploration and appraisal season, Fox said.
“This fall we’ll be drilling another appraisal well in the Narwhal trend from an existing drill site at Alpine to follow up on the promising results of this past winter.”
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Rig No. 1 at BlueCrest Energy’s Cosmopolitan Unit in Cook Inlet.
BlueCrest Energy is working to complete development on a trident fishbone it will use to explore the company’s largest reservoirs in the Cosmopolitan Unit in Cook Inlet, near Anchor Point, President and CEO Benjamin Johnson says.
“We pretty much have the design done and once we get all of this finished, we’ll apply for [the permit],” he says. “Our hope is to spud this well sometime this winter. I’d like to do it in the November/December time frame, but it may be January or February.”
The technology expands upon BlueCrest’s vertical fishbone wells, which allows the company to drill three miles out under Cook Inlet from onshore pads and will give BlueCrest increased access to the reservoir.
“We’re going to triple it out of one well,” Johnson says. “This trident well gives the same number of vertical wells through the oil formation as twelve wells if they were drilled from onshore straight down. It’s very economical.”
The reservoir’s vertical depth is approximately 7,000 feet, with the well itself having a total measured depth of approximately 37,000 to 38,000 feet when the ribs of the fishbone are added to the rest of the well, Johnson says. Exact employment figures aren’t finalized, but Johnson says BlueCrest typically hires 150 to 180 contractors.
Accumulate Energy Alaska
Accumulate Energy Alaska plans to drill Charlie #1, an exploration and test oil well, as part of a multi-year program, according to an application the company filed with the Division in August. The proposed well is approximately twenty-nine miles west of the Franklin Bluffs Pad, with access via a tundra winter ice road at Mile Post 386.7 off the Dalton Highway. The primary drilling objective is to test and evaluate the Seabee Formation, which is currently in production near the Kuparuk River Unit, for oil.
Winter operations include construction and maintenance of thirty-four miles of ice roads along the Main TWR and Charlie TWR Spur, two ice pads—one drill, one staging—and potentially an airstrip.
“I think we’ve got some things to be optimistic about in terms of increased activity, but it’s going to be awhile before that impact has any impact on the state treasury.”
Doing More with Less
Until project scope and budgets are submitted, both Smith and Popp say determining the number of jobs winter programs will create is little more than guess work. Decreases in the workforce following the oil price bust caused companies to perform a “long overdue efficiency workover of their supply chains, their workforce, and their methodologies,” Popp explains. When prices started to slowly rise, the efficiencies companies had implemented remained, not only to stay competitive and viable but because the industry simply learned to adapt.
Overall, jobs in the oil and gas sector fell for the fourth straight year, down 4.4 percent in 2018 for a loss of 100 jobs, according to the AEDC’s three-year outlook released in July. But these losses were the smallest annual decrease the industry has seen since it began trimming the workforce in 2014; preliminary data for 2019 projects year over year gains of 100 to 200 jobs.
While the increase in the number of jobs isn’t steep, it is an upward trend, which is good news for Alaska. The industry’s optimism has been bolstered further by North Slope crude oil trading at a premium to Brent crude for the majority of 2019, which may be in part attributed to contaminated oil from Russia and sanctions against Iran. Competitive prices, innovations for developing legacy fields, and several new discoveries all allow the companies operating on the Slope to justify investment in Alaska projects and infrastructure. “Smart policy should encourage new oil production from all fields in Alaska, which puts more oil in the pipeline,” Alaska Oil and Gas Association President and CEO Kara Moriarty stated in response to a proposed ballot measure to increase oil taxes. “More oil means more revenue for the state, and that’s the best long-term approach to helping the state’s fiscal problems.”
In This Issue
The Corporate 100
Alaska Business has been celebrating the corporations that have a significant impact on Alaska’s economy since 1993. At the time, the corporations weren’t ranked as the list didn’t have specific ranking criteria. Instead, the Alaska Business editorial team held long, detailed, and occasionally passionate discussions about which organizations around the state were providing jobs, owned or leased property, used local vendors, demonstrated a high level of community engagement, and in general enriched Alaska.