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Vol. 20, No. 13 Week of March 29, 2015
Providing coverage of Alaska and northern Canada's oil and gas industry

Conoco OKs NEWS

9.3-acre add to Kuparuk drill site last project announced after tax reform

Eric Lidji

For Petroleum News

ConocoPhillips Alaska Inc. will expand Drill Site 1H at the Kuparuk River unit.

The operator and its fellow working interest owners have approved an approximately $460 million project to add a 9.3-acre extension to the existing North Slope drill site and to install surface facilities to support four production wells and 15 injection wells. The project will develop viscous oil in the Northeast West Sak area, also known as NEWS.

The company expects construction to begin later this year and continue through 2016, employing as many as 150 people at the height of activities. The expanded drill site should come online in early 2017 and produce 8,000 gross barrels per day at its peak.

The 1H NEWS project is the largest investment in viscous oil at Kuparuk since 2004, according to ConocoPhillips. The working interest owners at the unit include BP Exploration (Alaska) Inc., Chevron USA Inc. and ExxonMobil Alaska Production Inc.

An expensive region

ARCO discovered West Sak in 1971, conducted a 15-well pilot project between June 1983 and December 1986 and brought Drill Site 1D online in December 1997.

ConocoPhillips has recently been developing the West Sak reservoir from six drill sites - 1B, 1C, 1D, 1E, 1J and 3K - all of which also produce from the Kuparuk reservoir.

In 2000, ConocoPhillips began a multilateral program at West Sak. The program grew increasingly complex over the years, including tri-lateral wells and undulating wells designed to target more of the formation. The company also expanded pad infrastructure.

Altogether, the heavy-oil development program cost around $500 million.

ConocoPhillips began appraisal drilling in the Northeast West Sak/NEWS area from Drill Site 1Q, Drill Site 3J and an ice pad north of Drill Site 1H in 2005 and 2006. The Alaska Division of Oil and Gas approved the formation of a NEWS participating area in 2009.

At a talk in Anchorage in April 2011, former ConocoPhillips CEO Jim Mulva listed the 1H NEWS project as one the company would pursue if the state changed the tax code.

All projects accounted for

The 1H NEWS project is one of several projects ConocoPhillips announced after Alaska lawmakers approved - and voters upheld - a change to the tax structure for oil.

Those projects were easier to justify at the time than they have been since, with Alaska North Slope crude oil currently trading for less than $50 per barrel on the West Coast.

Even so, ConocoPhillips sanctioned construction of Kuparuk River unit Drill Site 2S and stayed the course at its Colville River unit CD-5 satellite. The company also commissioned two rigs. Doyon 142 will be the first new rotary rig deployed at the unit since 2000. Nabors CDR3 is a new coiled-tubing rig, which is an important part of ConocoPhillips’ current technical strategy for the unit. The company also brought Nabors 9ES and Nabors 7ES to the Kuparuk River unit for infield drilling. The additional drilling activities have already added 9,000 gross barrels per day, according to the company.

The company had also announced plans to move ahead with the GMT-1 pad at the Greater Mooses Tooth unit, although, in late January 2015, the company said it was “deferring the final investment decisions,” citing “permitting delays and requirements, as well as the current oil price development.” Instead, the company intended to commission a 3-D seismic survey over the region and progress front-end engineering work.

Since that announcement, the U.S. Bureau of Land Management issued a record of decision for GMT-1, selecting ConocoPhillips’ preferred alternative for the project.



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