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Vol. 12, No. 3 Week of January 21, 2007
Providing coverage of Alaska and northern Canada's oil and gas industry

KUPARUK ANNIVERSARY: Development announcement in 1979

Although Kuparuk was discovered in 1969, shortly after Prudhoe Bay, it wasn’t until early 1979 that Atlantic Richfield announced it was proceeding with field development. The initial drilling and development program, for the first processing facility, associated drill sites and pipeline, was tagged at about $350 million. Average daily production of some 60,000 barrels per day was expected by 1982 and, with additional investment, and production of 100,000 bpd by 1984.

ARCO said this was the first phase of what could eventually become a $1 billion investment among several companies holding leases in the Kuparuk field; the initial effort, however, was exclusively by ARCO on ARCO leases.

ARCO Chairman Robert O. Anderson said the company was moving ahead because it felt Alaska’s negative investment climate, created chiefly through adverse tax policies, showed some sign of improvement. Anderson also said that further development beyond the initial phase would depend on the economics of the project and the future investment climate in Alaska.

Earlier in the year ARCO and Sohio had filed a suit against the State of Alaska, challenging the constitutionality of an Alaska corporate income tax that affected only the oil industry. “The lawsuit contends that the state’s present tax structure discourages high-risk investments for exploration in Alaska’s frontier areas,” he said. “The Kuparuk represents a fairly well-known quantity, with limited risk, which differs from the high-risk investments cited in the lawsuit.”

Approval a challenge

Just getting to development approval was a challenge.

Landon Kelly, on the team that studied Kuparuk development in 1976, told the ARCO Spark, the company newsletter, in early 1981 that even in 1978 they were unable to convince management to develop the field, considered “marginally economical.”

The team tried again in 1979. By then rising oil prices and the national need for domestic energy made Kuparuk attractive.

“It’s very exciting, though the expanded scope is making everything hectic,” Kelly said.

The scope had expanded because ARCO decided to get the field started up by the April 1982 target date and at the same time expand the project and develop the whole field.

The first phase, exclusively ARCO, targeted 20 sections, 20 square miles. At the same time, ARCO put together a long-range plan for Kuparuk and was working with owners of adjacent acreage to agree on a development plan.

The long-range plan amounted to a tenfold expansion and covered some 200 square miles.

—Kristen Nelson



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