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Weekly UpdatesAlaska's North Slope oil fields are entering a new phase of increased activity--one in which independents are working beside and with the three majors that currently produce the flow of oil from the maturing resource-rich region.
"It's certainly looking more robust than it has for a number of years," said Paul Laird, general manager of the Alaska Support Industry Alliance. "Look at the difference in oil price and the oil price outlook versus five years ago."
Recent new players to the North Slope fields include Shell Offshore, Talisman Energy's subsidiary FEX, Kerr-McGee, Chevron, Pioneer Natural Resources, a subsidiary of Italy's based Eni SpA, and a joint venture spearheaded by Alaska Venture Capital Group and its subsidiary, Brooks Range Petroleum. In addition, Anadarko Petroleum continues to work with its North Slope partner, ConocoPhillips, as well as on its own prospects.
The winter exploration season for 2007 that just concluded is wrapping up to be one of the most active periods in recent years. Exploration drilling and development work ranged from the far western prospects in the National Petroleum Reserve-Alaska to continued evaluation work by BP Alaska on its Liberty prospect, located east of the North Slope's mammoth-sized maturing field, Prudhoe Bay.
"What we believe very strongly is that we have a huge known resource base in a couple of areas," said Daren Beaudo, spokesman for BP Alaska. "We don't have to look for more oil to have a long-term robust business for many years. We here at BP talk about our 50-year future ... exploring the known and developing the known through technology."
While BP and the other two majors on the North Slope, ConocoPhillips and ExxonMobil, continue to invest in those known resources-nearby pockets of light oil, expansive resources of viscous and heavy oil and the future of natural gas commercialization--new explorers are looking at other prospects on the North Slope.
Those new explorers are investing in substantial work, including seismic and drilling projects, in an effort to find new oil resources on the North Slope, while the actual flow of crude is falling to less than half of its peak of nearly 20 years ago.
Back in the late 1980s, the 800-mile long trans-Alaska oil pipeline carried a little more than 2 million barrels of oil each day from the North Slope to Valdez, where ocean-going tankers then hauled Alaska oil to Lower 48 refineries.
Now, that flow has slowed to less than 800,000 barrels per day, and industry experts expect a continued decline that can only be reversed with development of a natural gas pipeline.
"I think everything hinges on what happens with gas commercialization. If that gets resolved favorably and investment picks up, not only by independents but also the majors, I absolutely see (oil) production going up," Laird said. "If the three major producers see that the gas project is not going to come together and go into a serious harvest mode, I see the (oil production) decline not only continuing, but gaining momentum."
Oil producers also link future oil production on the North Slope with advancement of the natural gas pipeline project.
"The beauty of Alaska's world-class resources is that they are huge; resources that are contained in all kinds of shapes and sizes. It's a big opportunity and what makes it all possible is advancement of the gas project," said Beaudo, at BP Alaska. "We will see another revenue stream through the gas solution. That spreads the cost for facilities over another revenue stream ... facilities that might be too expensive to be covered by just production of oil."
Existing production facilities that separate oil and gas from water would be used in the production of natural gas, extending the life of that infrastructure and providing some cost-sharing opportunities if gas is produced on a commercial basis, he added.
Furthermore, companies exploring for gas may find more oil on the North Slope, Beaudo added.
EXPLORATION IN 2007
The largest operator on the North Slope, BP Alaska is not among the companies conducting wildcat or frontier exploration on the North Slope this year. The last wildcat exploration well BP drilled on the North Slope was in the early part of the decade, Beaudo said.
Rather than looking for new resources, BP's focus is on developing resources in and around existing fields and near existing infrastructure, "... where the company has had the greatest success ... between 1991 and 2001, we added six times as many reserves by extending existing fields than we did by exploring," he added. "This strategic direction still maintains BP as one of Alaska's largest private investors with a $685 million capital budget. We remain committed to building a sustainable long-term future in Alaska, and have plans to maintain or exceed this level of investment in our North Slope activities well into the next decade."
Another major producer on the North Slope, ConocoPhillips, has been leading the producers' group in wildcat exploration, primarily in the western portion of the North Slope.
In the 2007 winter season, ConocoPhillips and its partners Anadarko Petroleum, which holds a 30 percent interest and Pioneer Natural Resources, which holds a 25 percent interest, focused on two sites in NPR-A. Those include Noatak, located about 60 miles west of the Alpine field, and Intrepid, located about 20 miles south of Barrow, according to ConocoPhillips spokeswoman Natalie Knox.
Noatak was accessed via a rolligon route from a pad near Kuparuk, a project that involved moving about 60 rolligon loads, she said. That drill rig was then moved 150 miles to the Intrepid prospect during the last two weeks of March.
"The exploration program faces a number of challenges including the lack of infrastructure in NPR-A, its distance from current areas of production, and the weather impact, which delayed the opening of tundra travel this year until Christmas Eve," Knox said. "This causes wells in NPR-A to be far more expensive than wells that are drilled near our existing facilities."
Well costs, targets and drilling results are proprietary and confidential, she added.
Also working in NPR-A is Talisman Energy's subsidiary, FEX L.P., which holds 1.4 million acres of North Slope exploration land. The company's Alaska budget for 2007 is $100 million, which includes drilling three wells, according to spokesman Barry Nelson.
Those prospects, located in the northwestern part of NPR-A, are called Amaguq, Aklaqyaaq and Aklaq No. 6, according to the company. Calgary-based Talisman Energy first started acquiring North Slope leases in 2004, Nelson said.
"Plans for 2008 and beyond will be influenced by exploration results from this winter's activities," Nelson said. "FEX L.P. is committed to establishing a long-term business in Alaska."
Another large exploration project on the North Slope is being planned by Shell Offshore Inc., which plans to drill up to 18 offshore exploration wells between 2007 and 2012 in the Camden Bay area.
The company plans to use two drilling rigs in the Beaufort Sea, the Shell Kulluk submersible drilling platform and the Frontier drilling Discoverer drillship, according to the company. Four wells are planned for the 2007 open-water season at the Sivulliq prospect, formerly called Hammerhead, and work on other prospects is planned for 2008 and 2009.
The Kulluk and the Discoverer are ice-class drilling units that are designed, engineered and constructed to safely operate in the Beaufort Sea, according to Shell Offshore.
A subsidiary of major producer Italian-based Eni SpA, Eni US Operating Co. is working on its Rock Flour and Maggiore projects. Rock Flour is adjacent to the eastern boundary of the Kuparak River Unit and Maggiore is located about 4 miles south of Rock Flour.
The company drilled three wells early in the winter season and requested in February permission to drill two additional wells, according to paperwork filed with the State of Alaska.
Eni also holds a 30 percent interest in the Oooguruk prospect being developed by Pioneer Natural Resources. Located northwest of Kuparuk, Oooguruk's plans call for development drilling to begin in late 2007, after facilities and equipment installation is completed.
First production from Oooguruk is targeted for 2008, according to Pioneer, which has a 70 percent interest in the unit. According to the company's published capital budget plan, Pioneer expects to invest approximately $350 million in Oooguruk, with about 30 percent of that invested in 2006, about 45 percent in 2007 and the remainder in 2008 and 2009.
Other exploration includes a growing consortium of smaller independents, spearheaded by land acquisition work started by Alaska Venture Capital Group about seven years ago. AVCG formed an operating subsidiary, Brooks Range Petroleum Co., which has partnered with Bow Valley Energy Ltd., TG World Energy Inc. and Ramshorn Investments Inc.
The consortium drilled two wells this spring, the Sak River No. 1 and the North Shore No. 1, both drilled by Nabors Alaska. Both prospects are located north of Prudhoe Bay.
The consortium describes Alaska's North Slope as "underexplored," with the potential to "discover new oil accumulations in the 20 to 200 million barrel range, using the newer technologies that are now available," according to a TG Energy news release. "Technology and lease land availability are opening the door to the beginning of a 'second generation' of exploration and development on the North Slope."
Such exploration work by smaller-sized independents can ultimately augment oil production by Alaska's majors, Laird said.
"The increasing role of independents on the North Slope is that they are in a better position to find, develop and produce cost effectively some of the smaller accumulations that would not be of interest to a major the size of Shell, BP or Exxon," he said. "Bigger companies, because of their overhead and the way they operate, tend to focus on much bigger opportunities."
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