Another big find

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ConocoPhillips announces Willow oil discovery to west of Mooses Tooth 2

ALAN BAILEY

Petroleum News

ConocoPhillips has announced a new oil find in the Greater Mooses Tooth unit in the northeastern National Petroleum Reserve-Alaska. Discovered by the Tinmiaq Nos. 2 and 6 exploration wells drilled in early 2016, the find, called the Willow discovery, could hold 300 million barrels of recoverable oil, the company said in a Jan. 13 press release.

Depending on the results of further appraisal drilling and the chosen development scenario, the field could produce at a rate of up to 100,000 barrels per day, the company said. ConocoPhillips has a 78 percent interest and Anadarko Petroleum a 22 percent interest in the find.

A test using the Tinmiaq No. 2 well showed a flow rate of 3,200 barrels per day of light 44 degree API oil over a 12-hour period, ConocoPhillips said. The company said that it will further appraise the discovery through a 3-D seismic survey commencing in January. The find lies west and slightly north of the company’s Mooses Tooth 2 development.

“This discovery is tremendously exciting not only for ConocoPhillips, but also for the state of Alaska,” said Joe Marushack, president of ConocoPhillips Alaska. “Willow’s proximity to existing infrastructure improves the economic viability of the discovery. Development of Willow, a potential multi-billion-dollar investment, could provide thousands of jobs during construction and could generate substantial revenue for the federal government, state, North Slope Borough, and communities in the NPR-A.”

Gov. Bill Walker commended ConocoPhillips on its discovery.

“I congratulate ConocoPhillips on its exciting and promising Willow discovery in NPR-A,” Walker said. “This is just one more piece of good news we’ve received from Alaska’s oil and gas explorers in recent months, and it demonstrates that Alaska remains an attractive place to do business and look for oil.”

Nanushuk play

During a talk at the Alaska Support Industry Alliance’s Meet Alaska conference on Jan. 13, Marushack said that the Willow discovery represents a new oil play for ConocoPhillips. As a follow-up to the discovery and as an avenue to pursuing the play, the company purchased neighboring acreage in the December 2016 state and federal lease sales: 65 tracts amounting to 594,972 acres in the federal sale, and 74 tracts amounting to 142,280 acres in the state sale. The federal tracts were purchased jointly with Anadarko Petroleum,

“We’ve got running room now to test that new play on state lands and onto federal lands,” Marushack said, also commenting that, although the play probably extends west from Willow, the play is blocked in that direction by land within NPR-A that has been withdrawn from oil and gas leasing.

Major NPR-A step out

Following the drop in the price of oil in the past couple of years, ConocoPhillips has an annual capital budget of about $5 billion, with around $1 billion of that being allocated to Alaska, Marushack said. That Alaska spend supports developments such as the GMT-1 and GMT-2 projects, as well as supporting the company’s North Slope exploration efforts. But, if Alaska projects are delayed, the capital allocated to those projects will be diverted to projects elsewhere. In particular, Alaska, with its relatively high cost environment, now competes for investment dollars with shale oil developments elsewhere in North America, Marushack said.

He said that ConocoPhillips had drilled 29 exploration wells in Alaska since 2000, about three-quarters of the exploration wells drilled in the state during that time period. However, the company did not drill any exploration wells between 2009 and 2013 because of the very high taxes in those years, he commented.

Two significant concerns

“A stable tax policy is absolutely critical,” Marushack said, later commenting that any increase in taxes would put the company’s North Slope development projects at risk.

Marushack said that the state provides much help with project permitting, including federal permitting. ConocoPhillips also works with the Alaska congressional delegation and with the Native communities.

“We’ve got this four or five pronged approach on how we are working these developments, and that’s what we need to do,” Marushack said.

Cost cutting

And given the need to maximize the trans-Alaska pipeline throughput and to maintain a thriving contractor community, the legacy producers on the North Slope are happy to see more companies operating on the Slope, Marushack said. Stories about the three big producers wanting to lock up the North Slope oil industry for themselves “could not be further from the truth,” he said.

Marushack said that he is particularly worried about there being enough investment in Alaska this year to retain a capable workforce in the state.

“We need our workforce. We need our contractors to be successful. We all need to come through this together,” he said.

But after what he characterized as one of the most difficult times that people in the oil industry can recall, Marushack expressed hope that a recovery is beginning to emerge.

GMT-1 and GMT-2

“It’s a great project for us, a great project for the state, a great project for the Native communities,” Marushack said.

GMT-2, which lies about eight miles farther into the NPR-A, is still at the permitting stage. But slow progress with the federal permitting is putting the project schedule at risk. The plan has been to have the permits in place in time to start construction in 2018, with a view to seeing first oil in 2020. Construction will require about 700 people and, as with GMT-1, oil production should peak at some 30,000 barrels per day.

Each of these step-out projects in the NPR-A will cost about $1 billion, a cost figure consistent with ConocoPhillips’ Alaska capital expenditure program, Marushack commented.

Oil infrastructure

Marushack expressed particular excitement with the new extended reach drilling rig that Doyon Ltd. is building for ConocoPhillips’ use. That rig, an around $1 billion investment, will enable access to about 125 square miles of the subsurface from a single 12-acre drilling pad. That compares with the five square miles of access from the original 65 acre pads on the North Slope and 55 square miles of access with existing rigs on 12-acre pads, Marushack said. The new rig has about 10 years of work ahead of it, starting with a Fiord West development in the Colville River unit.

Through all of this, ConocoPhillips sees safety as foundational to its success. In 2016 the company had its safest year ever in Alaska, and one of its best years for environmental performance.

“Safety is our license to operate,” Marushack said.

—A Mapmakers Alaska map was used to research this article.

Willow: part of a Brookian play

ConocoPhillips’s newly announced Willow oil discovery in the National Petroleum Reserve-Alaska is the third recent major oil find in Brookian rocks near and to the west of the Colville River delta, near the Beaufort Sea coast, to the west of the central North Slope. The Brookian is the youngest and shallowest sequence of rocks in the petroleum systems of the North Slope.

Armstrong Energy partnered by Repsol E&P USA is planning an oil development involving a major find in the Nanushuk formation in the Pikka unit, to the east of the Colville River delta. And Caelus Energy has announced a huge oil find in the Torok formation, immediately below the Nanushuk formation, at Smith Bay, about 90 miles west of the delta. The Torok and Nanushuk are formations, Cretaceous in age, within the Brookian sequence.

Willow has its oil reservoir in the Nanushuk and seems closely analogous to Armstrong’s Nanushuk discovery.

Significant new play

Houseknecht has suggested that the oil in the Brookian play has come from a source to the north, deep under the Beaufort Sea, with the oil flowing up the northern flank of the Barrow Arch. That contrasts with the oil in the currently producing fields, which appears to have flowed from the south.

However, Houseknecht has told Petroleum News that, with the Willow discovery lying well south of the coastline, on the south side of the Barrow Arch, the Willow oil has probably originated from a source under the discovery. The light character of the oil suggests a Brookian origin such as the HRZ, a prolific North Slope oil source rock. However, the older and deeper Kingak source rock is also a possible origin for the oil.

Stratigraphic traps

During a presentation to the Alaska Support Industry Alliance’s Meet Alaska conference on Jan. 13, Joe Marushack, president of ConocoPhillips Alaska, indicated that his company also believes that Willow forms part of a new oil play running east to west through the company’s leases in the northeastern NPR-A and adjacent state lands.

By contrast, the nearby Alpine oil field and its attendant satellite fields have oil reservoirs in the older and deeper Beaufortian rock sequence.

—ALAN BAILEY