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Vol. 22, No. 47 Week of November 19, 2017
Providing coverage of Alaska and northern Canada's oil and gas industry

The Producers 2017: ConocoPhillips advancing several projects

Eric Lidji

For Petroleum News

ConocoPhillips Alaska Inc. is the most active operator on the North Slope and one of the few companies sanctioning new North Slope developments despite the economic climate.

The local subsidiary of the largest independent exploration and production company in the world was not totally immune to larger economic forces over the past year. The company scaled back its development plans and marketed its Cook Inlet properties. But the company started production at Drill Site 2S and the CD-5 pads in recent years, is currently working to bring the 1H NEWS and the GMT-1 pads into production over the next year and is advancing a range of other developments through preliminary stages.

The company currently operates four North Slope units: the Kuparuk River unit, the Colville River unit, the Greater Mooses Tooth unit and the Bear Tooth unit.

The Kuparuk oil field

ConocoPhillips is currently pursuing two parallel strategies at the Kuparuk River unit.

The first is a targeted infill program to improve production at existing pads. The program generally includes a small number of new wells and a larger number of sidetracks.

The second is a gradual expansion of facilities targeting undeveloped sections of the unit.

ConocoPhillips produced 110,700 barrels per day at the unit in 2013, 110,200 bpd in 2014, 104,600 bpd in 2015 and 103,000 bps in 2016, according to the company. At the main field, ConocoPhillips produced 85,700 bpd in 2013, 83,200 bpd in 2014, 78,200 bpd in 2015 and 78,100 bpd in 2016. At the satellites, the company produced 25,000 bpd in 2013, 27,000 bpd in 2014, 26,400 bpd in 2015 and 24,900 bpd in 2016.

In its most recent plan of development for the unit, ConocoPhillips proposed a reduction in infill activities at the main Kuparuk oil field. For the year ending July 2018, the company plans to drill four new rotary wells and 16 coiled tubing drilling sidetracks, down from eight new rotary wells and 20 coiled tubing drilling sidetracks the year before.

The eight new wells were all at the Drill Site 2S development, in the southwest of the unit. The completion of initial development is one reason behind the expected decline.

The 20 sidetracks were drilled throughout the unit. The program included a cluster of five sidetracks at Drill Site 1H, Drill Site 1G and Drill Site 1B at the eastern edge of the unit; a cluster of four sidetracks at Drill Site 1L at the south of the unit; a cluster of three sidetracks at Drill Site 2M and Drill Site 2K near the 2S development; a cluster of four sidetracks in the north of the unit at Drill Site 3O, Drill Site 3Q, Drill Site 3N and Drill Site 3H; and sidetracks at Drill Site 3G, Drill Site 3F, Drill Site 2X and Drill Site 2B.

ConocoPhillips credited its sidetrack program - 55 laterals at the 20 sidetracks - with adding some 3,500 bpd in incremental oil production. The company credited a rig workover campaign with adding 1,600 bpd at the Kuparuk participating area and a non-rig workover program with adding an additional 10,700 bpd.

The company has been selecting sidetrack candidates using two 3-D seismic surveys - the Kuparuk West Sak survey from 2005 and the Western Kuparuk survey from 2011.

The construction of new facilities is part of a wider “infrastructure-led exploration” strategy, where the company pursues developments near existing wells or available infrastructure. The strategy was directly responsible for the Drill Site 2S project.

Although the company is considering projects that would require new drill sites, it has no plans to develop any new sites targeting the Kuparuk A and C sands before July 2018.

One potential project is a development in the Moraine interval at the western edge of the unit. The company has drilled three recent wells into the Moraine at the Kuparuk River unit, including a pilot project from the paired 3S-620 producer and 3S-613 injector wells.

“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 but offered no firm development plans.

Kuparuk satellites

ConocoPhillips made no firm drilling commitments at the four Kuparuk River unit satellites - West Sak, Tarn, Meltwater and Tabasco - for the coming year, aside from the resumption of drilling activities at the previously announced 1H NEWS development.

West Sak is the largest of the satellites.

ConocoPhillips did not drill any development wells at West Sak in 2016, focusing instead on “surveillance and optimization of existing wells,” according to the most recent plan of development. For the current year, the company said it was planning to “focus on existing developments” while also studying a range of potential future developments at the field.

The largest project is the planned resumption of activities at the 19-well Drill Site 1H NEWS development. The company placed the project on hold last year after completing major infrastructure construction but has said the project is on track for start-up by year-end. The company began drilling activities at the viscous oil project in August 2017.

ConocoPhillips is also studying potential West Sak developments at the existing Drill Sites 1D, 1C, 3K and 3N. The 1C program could include three new development wells at “lower-value” targets. The 3K and 3N programs will most likely be developed in phases.

The company is using recent drilling activities in the region to study a “potential major multi-well” Eastern NEWS development, which would require a new drill site.

The company is also considering potential Drill Site 3R development, which could require an expansion of the existing Drill Site 3R. Earlier this year, the company drilled and completed a pair of pilot wells - the 3R-101 producer and 3R-102 injector - at Drill Site 3R. The company is evaluating the project using a recently completed 3-D seismic survey over 47 square miles in the northern end of the unit. The company acquired and licensed the survey in mid-2014 and processed a portion of the survey during 2016.

ConocoPhillips did not drill any wells at the Tarn, Meltwater and Tabasco satellites in 2016 and was not planning any development drilling at the three fields for this year.

The Alpine field

The Colville River unit is an increasingly important center of regional activity for ConocoPhillips, allowing the company to expand development in at least two directions.

In its most recent plan of development, the company proposed a 14-well development program at the unit for the coming year. The proposed program is part of the initial campaign at the CD-5 pad, which came online in late 2015. The company drilled nine development wells - three producers and six injector s- from the CD-5 pad in 2016.

The program for the current year includes both rotary and coiled tubing drilling wells.

The rotary program calls for drilling seven multilateral wells - three producers and four injectors - into the Alpine participating area, all from the new CD-5 pad. The wells are CD5-20, CD5-17, CD5-19, CD5-9A, CD5-9C, CD5-10AB and CD5-10BC. The company already completed the CD5-18 multilateral well at the unit in January 2017.

The company is also planning four other Alpine participating area wells: three multilateral wells from CD-5 and a re-drill of an existing well at the CD-4 pad. All four wells are currently scheduled for subsequent years, but could be moved to this year.

The coiled tubing drilling program involves adding one or more laterals to the existing CD2-39 and CD2-47 wells. Depending on the results, the company might pursue similar opportunities at the CD2-42, CD2-33B and CD1-03A wells, and other confidential wells.

The recently drilled CD5-18 multilateral well, the seven planned rotary wells, the four un-named wells at CD-5 and CD-4 and the two coiled tubing drilling wells total 14 wells.

Colville River unit expansions

The development of the CD-5 pad has opened up several decades’ worth of development activity on properties farther to the west, including the GMT-1, GMT-2 and Willow prospects at the Greater Mooses Tooth unit and prospects at the Bear Tooth unit.

Over the past year, ConocoPhillips received three expansions designed to improve step-out activities at the Colville River unit. The sixth expansion included a bundle of leases between the Colville River unit and the Greater Mooses Tooth unit. The seventh expansion included a single federal lease in the center of the current Colville River unit.

The fifth expansion was more complicated, involving a deal with another leaseholder in the region followed by long deliberations between ConocoPhillips and state officials.

The expansion covers a large patch of acreage south of the unit, previously known as the Titania prospect and more recently known as the Tofkat unit and the Putu prospect.

Brooks Range Petroleum Corp. confirmed the presence of oil on the leases with an exploration program in 2008 but never developed the prospect. The state initially rejected an attempt by Brooks Range Petroleum to transfer the acreage to ConocoPhillips, only to reconsider.

Earlier this year, the state rejected a new plan of exploration from ConocoPhillips unless the company put forth $14 million in bonds and other payments, drilled an exploration well during the 2016-2017 season and a committed to a future development program.

ConocoPhillips and ASRC Exploration LLC reached a deal with the state in August 2017 that would allow ConocoPhillips to retain the leases, pending certain work commitments.

ConocoPhillips must drill an exploration well in the leases by May 31, 2018. Then, by Aug. 15, 2018, the company must announce plans for drilling a second well into the Nanushuk formation and must provide a $3 million bonus bid replacement payment.

The company must test the second well by May 31, 2020, and, if warranted, announce development plans by Aug. 14, 2020. If development is warranted, the company must make a second bonus bid replacement payment of $4 million (with a reduction possible in certain circumstances) and add the region to its Colville River unit plan of development.

Alpine satellites

In its most recent Colville River unit plan of development, ConocoPhillips referred to “other opportunities” at the Alpine participating area and at the other Alpine satellites: Fiord, Nanuq and Qannik. But those opportunities are confidential, at the moment.

ConocoPhillips is not planning any new drilling at the Fiord-Nechelik participating area or at the Fiord-Kuparuk participating area at CD-3 over the coming year, aside from a re-drill of the existing but “collapsed” CD3-111 well. The operation was scheduled for the first quarter of this year. The project includes plans to fracture-stimulate the new well.

At the Nanuq participating area at the CD-4 pad, ConocoPhillips is considering several potential rotary wells and coiled tubing drilling sidetracks over the coming year.

The list of potential drilling candidates was kept confidential in the plan of development.

ConocoPhillips is also considering several potential rotary wells and coiled tubing drilling sidetracks at the Qannik participating area at CD-2 over the coming year and has also kept the list of potential drilling targets confidential in its plan of development.

Altogether, the Colville River unit produced 51,100 bpd and 18.3 million barrels total in 2014, 50,500 bpd on average and 18 million barrels total in 2015 and 58,600 barrels per day and 20.6 million barrels total in 2016, according to the company, reflecting the strong production growth connected to the ongoing CD-5 drilling program.

Greater Mooses Tooth

ConocoPhillips is currently working on three projects at the Greater Mooses Tooth unit, in the National Petroleum Reserve-Alaska, each at a different stage in its development.

During a second quarter earnings teleconference for investors in late July 2017, the company announced that it had completed “key infrastructure components” at the GMT-1 development and expected to bring project into production in late 2018, as scheduled.

The approximately $900 million GMT-1 project includes a drilling pad, a 7.7-mile road and associated infrastructure and pipelines, and an initial drilling program of nine development wells. The GMT-1 pad will have capacity for as many as 33 wells.

The GMT-1 pad will sit at the eastern edge of the unit, about nine miles west of the CD-5 pad at the Colville River unit. Oil will be processed through existing Alpine facilities.

The company expects peak production of 30,000 barrels per day.

As the GMT-1 project moves toward start-up, ConocoPhillips is working through the early permitting stages of a potential GMT-2 development, eight miles west of GMT-1.

If sanctioned, the approximately $1 billion GMT-2 pad could come online in late 2020 and produce some 30,000 barrels per day at its peak, according to the company.

The U.S. Bureau of Land Management began its 18-month scoping review of the project in July 2016. In early 2017, the Native village of Nuiqsut asked the federal agency to delay consideration of the GMT-2 project to address some local environmental concerns.

In early 2017, ConocoPhillips announced a major oil discovery at the western edge of the unit, associated with the Tinmiaq No. 2 and No. 6 exploration wells drilled in early 2016.

The Willow prospect could potentially hold as much as 300 million barrels of recoverable oil. The prospect could be developed either as an Alpine satellite or as a standalone project with independent facilities. A satellite would likely produce between 40,000 and 50,000 bpd while an independent field could reach 100,000 bpd.

ConocoPhillips commissioned a 3-D seismic survey over the Greater Mooses Tooth unit earlier this year to collect more information about the geology of the Willow region. The company is planning expanded exploration drilling in the Willow region for this winter.

In February 2017, ConocoPhillips offered 2023 as an estimated timeframe for bringing Willow online, but acknowledged the risk of permitting and regulatory delays. The company recently established a special project team to evaluate development options.

The Bear Tooth unit remains in the early exploration stage.

ConocoPhillips drilled the Cassin No. 1 well at the federally managed unit to the northwest of the Greater Mooses Tooth in 2013 to meet a work commitment. The company announced a “new oil discovery” from the “wildcat” but has offered no details about the well since.

Developing the GMT-1 pad and the Willow prospect would provide ConocoPhillips with a way to reach Bear Tooth, continuing its decades-long westward step-out strategy.

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