With the recent marketing of its legacy Cook Inlet fields, and the suspension of its offshore activities in the Arctic Ocean, ConocoPhillips Alaska Inc. is focusing almost exclusively on its onshore North Slope properties for the immediate future.
And while the company has been perhaps the most enthusiastic operator on the North Slope in recent years, it is also making adjustments in response to current oil prices.
ConocoPhillips operates the Kuparuk River and Colville River units and is a working interest owner at the BP-operated Prudhoe Bay unit. In the National Petroleum Reserve-Alaska, ConocoPhillips operates the non-producing Greater Mooses Tooth unit and Bear Tooth unit. While the company sold its stake in the Beluga River unit to a pair of Southcentral utilities, the company still operates the North Cook Inlet unit. The legacy offshore field was also being marketed for sale but had not been sold by September 2016.
The Kuparuk field
Over the past few years, ConocoPhillips has been mitigating production declines at the Kuparuk River unit through a combination of two approaches: an infill program of coiled-tubing drilling sidetracks and multilateral wells, and infrastructure-led exploration.
When oil prices began to decline and stay low, ConocoPhillips was in the middle of a considerable expansion in development drilling at the unit. The company drilled 58 wells at Kuparuk in 2014 and 76 wells in 2015, according to Alaska Oil and Gas Conservation Commission records. Through the first six months of 2016, the company drilled 30 wells at the unit - slower than the pace of drilling in 2015 but faster than the pace in 2014.
The AOGCC figures classify each lateral in a multilateral well separately, which means the number of vertical wellbores is significantly fewer than the actual penetrations. Using figures provided by the company in its plans of development, ConocoPhillips drilled 26 vertical wells with 40 laterals in 2014 and 28 vertical wells with 48 laterals in 2015. In the first six months of 2016, the company drilled nine vertical wells with 21 laterals.
ConocoPhillips produced 110,700 barrels per day at Kuparuk in 2013, 110,200 bpd in 2014 and 104,600 bpd in 2015, according to the company.
Those figures indicate an accelerating rate of decline: down 0.4 percent between 2013 and 2014 and down 5 percent between 2014 and 2015. The declines were sharper at the main Kuparuk field, where ConocoPhillips produced 85,700 bpd in 2013, 83,200 bpd in 2014 and 78,200 bpd in 2015 - a 2.9 percent decline between 2013 and 2014 and a 6 percent decline between 2014 and 2015. At the four satellites, ConocoPhillips produced 25,000 bpd in 2013, up to 27,000 bpd in 2014 and down to 26,400 bpd in 2015.
The infrastructure-led exploration strategy has yielded two big projects in recent years.
An appraisal well in the southwest corner of the unit prompted ConocoPhillips to construct Drill Site 2S - the first new drilling pad at the unit in more than a decade.
ConocoPhillips brought the drilling pad into production in October 2015 and drilled one production well and five injection wells from the pad in the southwest corner of the unit through the remainder of the year and three more production wells through May 2016.
According to its initial plans, ConocoPhillips expects to drill 14 development wells from the drilling pad for the time being, although the facility can handle as many as 24. The $475 million project should eventually yield peak production of 8,000 barrels per day.
At the opposite corner of the unit, ConocoPhillips is in the early stages of expanding Drill Site 1H to develop the North East West Sak accumulation. While ConocoPhillips originally intended to begin the 1H NEWS program at Drill Site 1H this year, the company deferred the program in mid-2016 “based on market conditions.” Prior to making the decision, the company had already completed “much of the surface work to expand the existing DS1H gravel pad and facilities to accommodate the 19 new wells.”
Those investments give ConocoPhillips a reason to proceed quickly, should oil prices increase. And, if those hypothetical increases persist for a significantly period of time, ConocoPhillips believes the North East West Sak accumulation provides other opportunities for development, including projects at existing Drill Site 3K and Drill Site 3N, an expansion of Drill Site 3R to target offshore accumulations from the onshore facilities at Oliktok Point and a new drilling pad to target the “Eastern NEWS” development.
A third opportunity exists along the western edge of the unit, in the vicinity of Drill Site 3S. ConocoPhillips drilled two wells in the area in 2015 to appraise the potential of the overlying Cretaceous Brookian Moraine interval near the former Palm satellite.
ConocoPhillips drilled the vertical Moraine 1 well from an ice pad “to acquire extensive logs with whole core for detailed reservoir and overburden characterization studies, including special core analysis.” The company plugged and abandoned the well after operations were complete. The company also drilled and completed the horizontal 3S-620 production well from Drill Site 3S. Earlier this year, the company returned to drill the corresponding 3S-613 injection well. “Results from special core analyses and reservoir performance from the 3S-620 producer well and 3S-613 injector well will guide future development plans for the Moraine interval,” the company recently told state officials.
The Alaska Oil and Gas Conservation Commission approved pool rules for the Kuparuk River-Torok Oil Pool in July 2016, allowing ConocoPhillips to proceed with a 10-to-40-well initial development program from the existing DS-3S. Early indications suggest ConocoPhillips is planning “distinct phases” for developing the pool and would start at the low end of that range. But the company told state officials it could potentially build between one and two additional pads in the area to target other sections of the pool.
According to AOGCC estimates, the development from DS-3S could access between 100 million and 500 million barrels of oil in place from the Torok formation, and a development from an additional pad could access another 100 million to 300 million barrels of oil in place. The commission estimated a 5 percent primary recovery rate and a recovery rate between 13 and 55 percent using certain enhanced recovery techniques.
But while ConocoPhillips believes “appraisal and exploration opportunities exist” within the Kuparuk River unit, the company made no specific plans for new ventures this year.
The Kuparuk satellites
In recent years, the four Kuparuk River unit satellites - West Sak, Tarn, Tabasco and Meltwater - have helped offset or mitigate declines at the main Kuparuk oil field. But ConocoPhillips appears to be reducing its operations in the satellites for the short term, even as it sometimes hints at opportunities it wants to pursue at some point in the future.
ConocoPhillips drilled eight West Sak wells from Drills Site 1D and Drill Site 1C in 2015. The 1D program included the single-lateral injector 1D-142, the quad-lateral producer 1D-143, the single-lateral producer 1D-145 and the single-lateral producer 1D-146. The company is considering additional wells from the pad, pending the results of the recent program. The 1C program included the single-lateral injector 1C-152, the single-lateral producer 1C-153, the single-lateral injector 1C-154 and the single-lateral producer 1C-155. The company is considering three additional “lower value” targets from the pad.
Even with those additional wells, West Sak production declined to some 13,865 barrels per day in 2015, down from 16,241 bpd in 2014 and 15,772 bpd in 2013.
All six of the drilling sites currently being used to target the satellite are developing both the West Sak and North East West Sak participating areas and any new development will likely require facility upgrades. “These additional facility requirements add to the economic challenge of further West Sak/NEWS development in the current business environment,” ConocoPhillips wrote in its current plan of development.
ConocoPhillips is also planning to take a hiatus from its recent activities at the Tarn satellite this year, after completing a successful nine-well program in 2014 and a five-well program in 2015. Those two programs yielded significant results. Tarn production increased to 9,300 barrels per day in 2015, up from 7,700 bpd in 2014 and 5,600 bpd in 2013.
Between April and December 2015, the company brought four production wells and one injection well into operation from Drill Site 2L and Drill Site 2N, adding some 477,000 barrels of oil production at a combined rate of 1,050 bpd in December 2015.
But even with the recent success at Tarn, ConocoPhillips is planning no development drilling at the satellite under its current development plan, which expires at the end of July 2017. The company is evaluating recent drilling results to identify future projects.
The drilling programs at Tarn in 2014 and 2015 only delineated the Bermuda interval, and two other intervals could provide opportunities: the older Purple interval, which has seen “encouraging” results from other wells, and the younger Cairn interval. In previous plans of development, the company has also mentioned the Esker interval.
The Tabasco and Meltwater satellites have received much less investment than West Sak or Tarn in recent years, and ConocoPhillips has no development drilling planned for either satellite in the coming year. Even so, production increased at both satellites in 2015. Tabasco produced 1,619 barrels per day in 2015, up from 1,549 bpd in 2014 and down from 1,711 barrels per day in 2013. Meltwater produced 1,569 bpd in 2015, up from 1,439 bpd in 2014 and down from 1,971 bpd in 2013.
The Colville River unit
As has been the case since Philips Inc. brought the unit online in 2000, development at the Colville River unit is continuing to proceed in a step-by-step manner to the west.
That westward march was stalled for several years while ConocoPhillips battled regulators over plans for its CD-5 pad, but with those debates resolved and the pad now operational, drilling has been increasing. The company drilled six wells at the unit in 2014, 10 wells in 2015 and 13 wells in the first nine months of 2016. Initially, ConocoPhillips planned to drill 15 wells in its first phase of development at the CD-5 pad. But in late April 2016, after reviewing results from the first 10 wells from the pad, the company announced plans to more than double the development to 33 wells.
The CD-5 program should increase overall production from the Colville River unit. The unit produced some 51,100 barrels per day on average, some 18.3 million barrels total in 2014, and some 50,500 bpd on average and 18 million barrels total in 2015.
Through the first six months of 2016, the unit produced approximately 11.1 million barrels, which would put the unit on pace for a notable increase over 2015 levels.
According to the AOGCC, ConocoPhillips drilled 12 wells at the unit between May 2015 and mid-April 2016, and all from the CD-5 pad. The drilling program included nine producers (CD5-03, CD5-04, CD5-05, CD5-09, CD5-10, CD5-11, CD5-21, CD5-315 and the suspended CD5-314 well) and three injectors (CD5-01, CD5-07 and CD5-313).
The CD5-313 well (which ConocoPhillips said is associated with the CD5-314 well) was a horizontal producer into the Nanuq Kuparuk. The CD5-315 well was an associated horizontal injector. (The CD5-313 well is listed as an injector in AOGCC records and a producer in the plan of development and the CD5-315 well is listed as a producer in AOGCC records and an injector in the plan of development.) The CD5-313 well accounted for “the majority of Nanuq Kuparuk production” in December 2015, according to the company. Given those positive results, ConocoPhillips plans to drill the CD5-SUN3 well in the second half of this year. With positive results, the company might drill an additional Nanuq Kuparuk well, CD5-SUN4, between the mid-2016 and early 2017.
ConocoPhillips drilled eight more CD5 wells between May and September 2016.
Greater Mooses Tooth
The primary regulatory hang-up for the CD-5 project concerned a bridge crossing a channel of the Colville River, and the resolution of that matter allowed ConocoPhillips to proceed with two immediate development projects even farther west, into the Greater Mooses Tooth unit at the eastern edge of the National Petroleum Reserve-Alaska.
The U.S. Bureau of Land Management approved the GMT-1 development in February 2015. ConocoPhillips later sanctioned the $900 million project and expects production by 2018. BLM launched its environmental review of the GMT-2 project in July, which means that approval or denial and a subsequent decision about sanctioning is a ways off.
To ease that stepwise development, ConocoPhillips asked the state earlier this year to expand the Colville River unit to make its border contiguous with Greater Mooses Tooth.
And ConocoPhillips is continuing exploration activities on lands beyond those developments. While those activities include plans for exploring the western edge of the Greater Mooses Tooth unit, they could also mean activities on state owned acreage.
Earlier this year, ConocoPhillips acquired a portion of the leases from the former Tofkat unit. Those leases were briefly a part of the Colville River unit in 2002 but were relinquished after ConocoPhillips failed to meet drilling commitment associated with the expansion. If ConocoPhillips builds up the lease position, it could presage a new satellite.
North Cook Inlet
After completing a three well program at the North Cook Inlet unit in 2008, ConocoPhillips reduced its development program at the offshore field in Cook Inlet.
A decline in reservoir pressure across most of the field and increased sand production in places have contributed to an overall decline in production since the drilling program.
The unit has traditionally been connected to the Kenai liquefied natural gas facility in Nikiski. Activity at the plant has been sporadic in recent years. ConocoPhillips shipped five cargoes between May and September 2014 and six cargoes between May and mid-October 2015. The company made no shipments in the first quarter of 2016, despite receiving U.S. Department of Energy permission to continue exports from the facility.
Instead, the company is selling North Cook Inlet production into the local market.
By the start of 2014, the North Cook Inlet unit had produced 1.879 trillion cubic feet of natural gas. The unit produced 9.29 billion cubic feet that year and 7.33 bcf in 2015 for a total of 1.896 trillion cubic feet at the start of this year. In the first six months of 2016, the unit produced 3.58 bcf, which suggest a decline from 2015 production levels, although not as steep as the decline between 2014 and 2015.
The slowdown in declining production this year might be the result of a four-well workover program and other maintenance projects ConocoPhillips undertook at the North Cook Inlet unit in 2015. When the company released its plan for 2016, it proposed no such work for this year but looked forward to a possible workover program in 2017.
The actual plan for 2017, released in early October 2016, provided few details, noting “The team continues to evaluate future rig work-over and/or drilling opportunities” and “ConocoPhillips plans to continue to evaluate potential undeveloped accumulations.”
