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Conoco strong in Arctic Strategy involves low-risk and frontier drilling, includes Chukchi Sea, Sverdrup Alan Bailey Petroleum News
A combination of relatively low-risk drilling with bold moves into new frontiers would seem to characterize ConocoPhillips’ current exploration strategy, according to a presentation at the company’s 2008 analyst conference on March 12.
John Lowe, ConocoPhillips executive vice president of exploration and production, said that recently appointed head of exploration, Larry Archibald, is now coordinating the company’s worldwide exploration strategy. A key feature of the strategy is to drill exploration wells that have a high probability of success.
“I think many of you would have observed last year we didn’t do a lot of speculative drilling, and we didn’t have many dry holes,” Lowe said. “… And we really reassessed 18 to 24 months ago (and said): ‘Let’s look at the portfolio. Let’s not drill the low-probability-of-success wells. Let’s not drill wells that can’t have a material impact on us.’”
Close to infrastructure One particular focus is what ConocoPhillips characterizes as infrastructure-led exploration, close to existing oil and gas infrastructure. In Arctic Alaska, the search for satellite fields next to the Alpine field in the Colville River Unit on the western edge of North Slope development demonstrates that approach.
“We are continuing to find satellite fields to fill that (Alpine) infrastructure,” Lowe said. “As you can imagine, those are extremely profitable, high return projects … Qannik, Alpine West, Lookout and Spark, all satellites to Alpine,” he said, referring to Colville River Unit and National Petroleum Reserve-Alaska satellites to the existing field.
Moved into Chukchi Sea ConocoPhillips is also moving into new frontiers, as exemplified by its bidding in the February Minerals Management Service’s outer continental shelf Chukchi Sea lease sale.
“We were successful on more than $500 million of (Chukchi) bids,” Lowe said. “We feel very good about our results in the Chukchi Sea round. These are very high success case barrels in the Chukchi Sea, and these are pretty high rate of success probabilities. Obviously, you have to find something big up there because of the transportation.”
One of the slides presented at the analyst conference said that ConocoPhillips has “established a position in two (Chukchi) prospects with standalone hub potential” and that the company had “captured three satellite prospects that could be explored in a success case.”
ConocoPhillips was apparent high bidder on a large number of tracts surrounding the old Shell Klondike well in sale 193 — the largest block of tracts on which it was apparent high bidder — and also took a number of tracts west and east of Shell’s Burger well, along with a smaller number west of Shell’s Popcorn well.
Lead position in Canada’s Arctic Islands Lowe also said that ConocoPhillips enjoys a “leading position in the Canada Arctic Islands.” This region lies to the west of northern Greenland and encompasses the petroliferous Sverdrup basin. According to a report by consultant Robert Meneley, the Sverdrup basin contains discovered in-place resources of about 20 trillion cubic feet of natural gas and 1.9 billion barrels of oil; Benoit Beauchamp, executive director at the university of Calgary’s Arctic Institute of North America, says that Canada’s Arctic Islands have a resource potential of 118 trillion cubic feet of gas and 3.8 billion barrels of oil.
The Mackenzie Delta and adjacent Beaufort Sea is another area of exploration focus for ConocoPhillips.
“We’re working very well with our partners. We’re working very well with the Native groups. We’re working very well with the Canadian government,” Lowe said. “I really am quite hopeful that we’ll make some progress on Mackenzie gas this year.”
Technology critical But Lowe emphasized that, with few new conventional oil and gas opportunities around the world, state-of-the-art technology has become critical to capturing new reserves.
“Technology is going to be the key to unlocking unconventional heavy oil, Arctic oil, tight sand and ultimately things such as oil shale and hydrates,” Lowe said. “So we think that we’re one of the few companies around the world that has a technology program. We see a renewed emphasis at ConocoPhillips in technology and we certainly are applying a lot more resources to it.”
On the Alaska North Slope ConocoPhillips is developing heavy oil at West Sak. West Sak has 8 billion barrels of oil in place and has current production of 18,000 barrels per day, Lowe said. West Sak production will continue to grow and there are additional opportunities in the Ugnu field that sits on top of West Sak, Lowe said.
North Slope gas line Lowe also commented on the current status of a potential North Slope gas pipeline. ConocoPhillips thought that the gas pipeline proposal that it submitted outside of the Alaska Gasline Inducement Act “captured the most critical elements” of what Alaska Gov. Sarah Palin is trying to do, Lowe said.
“The governor did not exactly embrace our plan, so we are … reassessing whether we stick with that same proposal or not,” Lowe said. “But what we decided internally is we need to get the Alaska pipeline moving. And so, undeterred, we are going forward with our summer program this year, and ultimately we need to have everyone working together.”
ConocoPhillips is taking action because it sees the gas pipeline as an important project that will enable the development of North Slope gas, one of the company’s largest captured resources.
Lowe also commented on the new, higher production tax in Alaska, which he said “does negatively impact us.”
But, overall, ConocoPhillips has established a very strong position in the Arctic, Lowe said.
“This is in oil. It’s in gas. It’s discovered resource. It’s in exploration,” Lowe said. “So we have a very strong land position. … We’re the leading oil and gas producer in Alaska. But there’s a lot more running room.”
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