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Providing coverage of Alaska and northern Canada's oil and gas industry
January 2014

Vol. 19, No. 4 Week of January 26, 2014

BP president: more Prudhoe development

Says new drilling rigs, drilling programs will add jobs and create more production; pleased with state involvement in LNG project

Alan Bailey

Petroleum News

Commenting that Alaska is the only one of 13 oil and gas producing U.S. states not to see a production increase in response to high oil prices in the past couple of years, BP Alaska President Janet Weiss told the Alaska Support Industry Alliance Meet Alaska conference on Jan. 10 that BP “is committed to playing an important role in Alaska’s energy renaissance.” BP and its partners want to play their part in trying to turn the state’s oil production decline into an increase, she said.

“We invested 12 percent more in 2013 than we did in 2012,” Weiss said. “Our plans call for 40 percent more in 2014 than we spent in 2013.”

Weiss also commented that the state’s decision to participate in a liquefied natural gas project, to market North Slope gas, would facilitate commercial alignment in the project and would become an important consideration in the business case for project continuation.

“We are really pleased at BP with the State of Alaska’s decision to participate as an equity owner, a partner,” Weiss said.

Tax reform

Weiss attributed BP’s resurgence of interest in Alaska oil development to the reform of the state’s oil production tax, enacted during the last legislative session. Under the new oil tax BP plans to re-invest nearly 90 cents of every dollar that the company makes in Alaska over the next five years, she said. This represents a 60 percent increase in investment, compared with what happened during the previous tax regime, she said.

“I’m talking about projects that will play a substantial role in supporting Alaska’s economy for decades,” Weiss said. “Oil and gas development is one of the most effective engines for generating jobs in the Alaska economy.”

Weiss said that BP’s initial focus is on light oil, which she characterized as the “bread and butter” of the oil industry and the resource that provides the economic foundation for the more challenging North Slope resources such as heavy oil and liquefied natural gas.

New investment

“We and our working interest owners at Prudhoe Bay will increase our production generating investments by $1 billion over five years, including adding two new drilling rigs, starting in 2015,” Weiss said.

The additional rigs will increase BP’s North Slope rig fleet size to nine rigs, compared with just five rigs in 2012. That will result in an additional 30 to 40 wells being drilled each year, she said. And each new rig directly adds around 200 new jobs to the Alaska economy, she said.

A potential $3.2 billion of additional investment by the Prudhoe Bay working interest owners can result in 118 new wells; the first new Prudhoe Bay well pad in more than a decade; the expansion of two existing pads; and the debottlenecking of some facilities in the western part of the field. There is the potential for 200 million barrels of new oil resources, adding 40,000 barrels of oil per day to the throughput in the trans-Alaska oil pipeline, Weiss said.

Sag River

A production opportunity that is gaining momentum is the development of the Sag River formation, a thin and technically challenging oil reservoir above the main Prudhoe Bay reservoir, Weiss said. BP has conducted some field tests in this formation, trying out some new techniques that may reduce development costs.

“This play is very development cost challenged,” Weiss said.

Following some successes in the play, BP is moving forward with a 16-well program scheduled for 2015 and 2016, with the ultimate possibility of 200 new wells and perhaps 200 million barrels of new oil, she said.

BP is also considering some new viscous oil development in the northwest Schrader area of Milne Point, an area where BP is a 100 percent working interest owner. That development would require $1 billion to $2 billion in investment, with the potential to bring 80 million barrels of new oil on line while creating hundreds of jobs. But the viability of this project will require some new technology advances, Weiss said.






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