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Providing coverage of Alaska and northern Canada's oil and gas industry
September 2018

Vol. 23, No.37 Week of September 16, 2018

Newfield looking at Alaska; Begich, Dunleavy weigh in; L48 shale boom tapering off

Kay Cashman

Petroleum News

Texas-based independent Newfield Exploration has people visiting Alaska to look at the North Slope’s geologic potential.

Headquartered in The Woodlands, Texas, the visiting scientists are not handing out business cards to everyone they meet, so the visit is very hush-hush.

Per the big independent’s website, Newfield is an oil company focused on profitably growing liquids-rich unconventional resource plays in the Anadarko and Arkoma basins of Oklahoma, the Williston basin (Bakken) of North Dakota and the Uinta basin of Utah. Newfield also has oil developments offshore China, but approximately 98 percent of the company’s proved reserves are onshore U.S.

According to www.newfield.com, “Newfield has a clear vision - to be recognized as the premier independent E&P company delivering operational excellence, top tier business results and value to our shareholders, employees and the communities in which we live and work.”

- KAY CASHMAN

Begich, Dunleavy weigh in on Pt. Thomson, Walker’s LNG deal

The Democratic and Republican candidates in the Alaska governor’s race have weighed in on incumbent Bill Walker’s latest announcement on his $43 billion-plus proposal to build a natural gas pipeline from the North Slope to Nikiski on the Kenai Peninsula, where the gas will be liquefied, with 75 percent of the LNG going to China. The Chinese, represented by China Petrochemical Corp. or Sinopec, CIC Capital Corp. and the Bank of China, will play a role in construction. In April, Alaska Gasline Development Corp. President Keith Meyer said Sinopec has a very capable construction company and has built longer pipelines than this project, in higher places and with larger plants. He said the ability of Alaska companies is something AGDC is promoting to the Chinese.

On Sept. 10 the governor’s office said Alaska has agreed to extend a key deadline in a 2012 lawsuit settlement with ExxonMobil and BP over development of the Point Thomson unit gas and condensate field 60 miles east of Prudhoe Bay on Alaska’s North Slope.

State Commissioner of Natural Resources Andy Mack said the deal was reached to facilitate PTU operator ExxonMobil’s agreement to supply its North Slope gas, both at Point Thomson and in the BP-operated Prudhoe Bay unit, to the proposed Alaska LNG Project. The PTU holds an estimated 8 trillion cubic feet of natural gas and is an important part of the gas supply needed for the Alaska LNG Project. The Prudhoe Bay unit holds 22 tcf of gas.

A letter of agreement entered into by the state, ExxonMobil and BP extends a December 2019 deadline for the companies to expand PTU development beyond a pilot program now underway to produce condensate from the Thomson sands, although currently shutdown by Exxon because of technical problems.

The stay will end when there is a final investment decision on an Alaska LNG Project or work on the Alaska LNG Project is no longer progressing.

In a separate statement AGDC, backed by gubernatorial incumbent Walker, said it has reached an (unbinding) agreement with Exxon on certain key terms including price and volume for a gas sales agreement. It was signed Sept. 10, AGDC said, for terms for the purchase of Exxon’s share of Prudhoe Bay and PTU natural gas.

Begich wants Alaska workers on gas line, concerned about China

Gubernatorial candidate Mark Begich told Petroleum News Sept. 12 he was always concerned about what the governor gave up in gas project-related negotiations, noting there are too many unanswered questions: “We want to be sure Alaska got a good deal, not just a fair one … or worse.”

“We want Alaska workers working on that pipeline if it comes to fruition,” he said, which is something that cannot be legally mandated by the state, although the state can insist unionized labor be used.

Begich was also concerned about the economics of the gas project, questioning whether it made sense or whether it would lay a heavy burden of debt on the state.

The former U.S. senator from Alaska also referred to China’s controversial involvement in South Africa, which has U.S. security advisers worried in both Congress and the executive branch.

“Look at what China is doing in South Africa. The Chinese are extracting everything they can, controlling resources. The U.S. government, I believe, would not allow China to control Alaska North Slope gas. … In my opinion, if we can make a North Slope LNG project economic and not a burden on Alaska, then we should market our gas to other Asian markets, so China does not own the majority of our gas and have any involvement in its construction.”

Dunleavy said LNG project must make economic sense

Gubernatorial candidate Mike Dunleavy released the following statement in response to the Walker administration’s “letter of understanding” with the Point Thomson working interest owners on the Alaska LNG Project.

“We all support monetizing our vast natural gas resources for the benefit of all Alaskans. But for Alaskans to benefit, the project must make economic sense, and today’s announcement doesn’t change that underlying fact. Without further information, and with too many unanswered questions, we don’t know if today’s news represents a positive step forward for the project. What we do know is that press releases don’t build pipelines.”

“Our campaign remains committed to a project that maximizes the benefit to all Alaskans without jeopardizing our financial future, one driven by the private sector, not politics,” Dunleavy said.

- KAY CASHMAN

Financial Times: US shale boom begins to cool

Per a Sept. 7 article in the Financial Times, the U.S. shale oil industry is “slowing as logistical challenges including labor costs and a lack of adequate pipeline capacity pile up.”

FT reporter Ed Crooks summarized what the chief executives of oilfield service firms Halliburton and Schlumberger and major shale producer EOG Resources said in presentations at the early September Barclays conference in New York.

“Evidence is accumulating that the boom in the industry that began two years ago is cooling off, particularly in what has been its incandescent center, the Permian basin of western Texas and eastern New Mexico,” Crooks wrote, adding that both Halliburton’s Jeff Miller and Schlumberger’s Paal Kibsgaard “highlighted a slowdown in the number of new wells being brought into production.”

Kibsgaard said the North America market for hydraulic fracturing had “already softened significantly more than we expected” in the third quarter. The Permian basin in particular, he said, faced challenges that he expected to “have a dampening effect on production growth, wellhead prices and investment levels in the coming year.”

Bill Thomas said EOG’s expectation for the Permian basin was “probably a little bit more subdued on growth than most people would have it. It’ll grow certainly for the next few years, but it’ll grow at a slower pace every year and won’t be the thing that’s going to destroy oil prices again because it’s going to grow so fast.”

THIS GRAPH CAN BE CUT: Note: Shale oil is more accurately referred to as source rock oil, since shale is only one of several source rocks in the country.

- KAY CASHMAN






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