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Vol. 9, No. 48 Week of November 28, 2004
Providing coverage of Alaska and northern Canada's oil and gas industry

In high gear

Bowles: Alaska holds multiple investment opportunities for Conoco

Kristen Nelson

Petroleum News Editor-in-Chief

Jim Bowles, who took over as president of ConocoPhillips Alaska in October, told the Resource Development Council conference Nov. 18 in Anchorage that ConocoPhillips sees new investment opportunities in Alaska in several areas: increased recovery in existing fields; continued development of satellite fields; aggressive development of heavy oil; continuous exploration; and successful Alaska North Slope natural gas commercialization.

Alpine is an example of an existing field where new investment has increased recovery, Bowles said. ConocoPhillips and its partner Anadarko Petroleum are investing some $60 million in each of the two facility expansion programs at the Alpine field. From its initial flow rate of about 80,000 barrels per day in November 2004, Bowles said, Alpine production has been increased to more than 100,000 bpd, with a current flow rate of about 113,000 bpd. By the time work on the second facility expansion is completed next year, capacity will be increased to 130,000 bpd, he said.

Satellite fields have been developed recently at Prudhoe Bay and Kuparuk, and Alpine satellites are in the planning stage in both NPR-A and on state and Native lands east of NPR-A. “In total right now we’re seeing about 100,000 barrels a day of production on the slope is generated from these satellite-type fields,” Bowles said. With the slope’s large fields on decline, he said, satellite development is what will keep “volumes flat.”

Most recently ConocoPhillips has been working on satellite development in the Colville River unit (where the Alpine field is in production) at Fiord and Nanuq, CD-3 and CD-4. “We’ve been in the permit stage” and earlier in the month, ConocoPhillips received environmental impact statement approval from the Bureau of Land Management for the five satellites planned at Alpine, both in NPR-A and to the east.

Bowles said the company still needs one permit; “we’re working on it. We’re very hopeful that we can get this project started this winter.”

Heavy oil production headed up

West Sak, where heavy crude overlies Kuparuk, is now being successfully developed with horizontal wells, he said. Most recently multi-lateral wells have been drilled, with separate horizontal penetrations into different sands from the main well bore, and an undulating horizontal, which “actually goes up and down and comes in between two different sands.”

Original wells in the West Sak produced just a few hundred barrels a day. With horizontal multi-laterals, Bowles said, wells “come on at production rates far in excess of what we’ve ever seen before. We’ve seen initial rates up into the 7,000 barrels a day rate — that may taper off to 1,500 or 2,000 barrels — but it makes them a very economical way to develop the field.”

The horizontal multi-lateral wells “may cost three times as much as what we were normally drilling,” but pad locations are minimized.

By 2007, he said, West Sak production could be 40,000 to 50,000 bpd, and up to 100,000 bpd of heavy oil with production from the Orion satellite in Prudhoe. The West Sak portion of this program, he said, is about $500 million.

On the exploration front, “ConocoPhillips has been very active,” Bowles said, and, in addition to acreage on state lands, with its partners holds up to 1.9 million gross acres in NPR-A. “It is the focus of a lot of attention in our company as far as future drilling activity.”

In the 2004 winter drilling season, ConocoPhillips drilled five exploration wells, with a sixth that should be drilled before year end.

Good year ahead

Bowles said the company did not yet have its final budgets approved for 2005, “I can tell you that we can expect to see a very active year going forward exploring through this next winter season.”

Plans appear to include four exploration wells, as ConocoPhillips said in a Nov. 17 presentation to analysts that its 2005 Alaska exploration program was expected to include two wildcat and two appraisal wells.

As for North Slope gas commercialization, this is the “Big Kahuna” of all investments, Bowles said, adding that the company is very encouraged by Congressional passage of legislation to enable and ensure economics, and that “the governor has seized the initiative as far as where we stand now and is coming forward with a proposal to see if the state can have some type of equity ownership in the line.”

As for concerns, Bowles said what concerns us “the most, as an industry, is the tax picture.” Some 87 percent of revenues going into the state’s general fund come from the oil and gas industry, and with high oil prices, there is pressure to increase that percentage.

“We as a company, and the energy industry, just do not see that’s the best way forward to encourage investment,” Bowles said.



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