Last year was one of the worst years for North Slope development drilling in the past decade. And yet, historically speaking, things could have been a lot worse in 2016.
The seven operators of producing North Slope units drilled 134 development wells in 2016, according to information from the Alaska Oil and Gas Conservation Commission.
Between 2007 and 2016, only three other years have yielded fewer wells. North Slope producer-operators drilled 132 development wells in 2009, 125 in 2011 and 101 in 2013.
And because 2015 was by far the most active year for North Slope development drilling over the past decade, 2016 also experienced the largest year-over-year decline during that period. North Slope operators drilled 48 fewer wells in 2016 than in 2015, compared to a 43-well decline between 2012 and 2013 and a 42-well decline between 2010 and 2011.
The majority of the decline can be traced to the Prudhoe Bay unit, where operator BP Exploration (Alaska) Inc. drilled fewer wells than it had in any year over the past decade.
The Kuparuk River, Oooguruk and Nikaitchuq units also saw notable declines.
There were some reasons for optimism in 2016.
Even though oil prices in 2016 were lower than any other 12-month stretch over the past decade, the well count was only eight shy of the 10-year average of 142.3 wells per year and overall throughput through the trans-Alaska oil pipeline actually increased over 2015.
Also, both the Colville River and Milne Point units saw increased activity in 2016, and drilling at the Point Thomson unit stayed even, albeit at the low rate of one well. And recent increases at the Hilcorp Alaska LLC-operated Milne Point could presage increases at the Northstar and Duck Island units, which Hilcorp also acquired in recent years.
The well counts include development drilling at the Badami, Colville River, Duck Island, Kuparuk River, Milne Point, Nikaitchuq, Northstar, Oooguruk, Point Thomson and Prudhoe Bay units, as well as the Barrow gas fields, between January 2007 and December 2016. The well counts do not include recent development drilling at the Southern Miluveach unit, which has yet to begin production due to technical obstacles.
The figures only include wells labeled “development” in the recently completed well reports published weekly by the AOGCC. Some exploration wells are later converted to development wells. Some development wells are reported at a delay after completion.
As a result, revised totals could be higher but are unlikely to be lower.
Prudhoe and Kuparuk
The Prudhoe Bay unit and Kuparuk River unit typically account for more than 75 percent of all North Slope development drilling in a given year. As a result, cutbacks in operations at those two units have a greater impact than heavier cuts at smaller fields.
BP drilled 42 development wells at Prudhoe Bay in 2016.
Although the total is the lowest for any year over the past decade, and a major drop from the 75 wells drilled in 2015, the well count for 2016 fits with a longer trend. The company drilled between 69 and 78 wells per year at Prudhoe Bay between 2007 and 2010, but it only drilled between 47 and 54 wells per year between 2011 and 2014.
The trend appeared to be reversing when BP drilled 75 wells at the unit in 2015. The company billed the increase as a return to greater investment on the North Slope. But the drop in prices starting in late 2014 and continuing through 2015 halted that momentum.
The 2016 program at Prudhoe Bay consisted primary of sidetracks and laterals.
The program departed from recent history in one notable way. In addition to continuing its recent focus on the main Prudhoe Bay oil field, BP also drilled two wells at the Aurora satellite, two wells at the Lisburne satellite and a rare well at the Niakuk satellite.
ConocoPhillips Alaska Inc. also cut back on its development drilling at the Kuparuk River unit, but much less than BP did at Prudhoe Bay. In fact, the 66 development wells that ConocoPhillips drilled at the Kuparuk River unit in 2016 was the second highest well count of any year over the past decade. Only 2015, with its 77 wells, had a higher total.
While Prudhoe Bay drilling fell in 2011, Kuparuk activities have fluctuated more from year to year, falling in 2008, rising in 2010, falling again in 2013 and rising again 2014.
And while BP drilled progressively fewer wells at Prudhoe Bay in each of the four quarters of the year, Kuparuk gradually increased its drilling, aside from the traditionally lower development work during the summer months when companies perform maintenance.
In its 2016 program at Kuparuk, ConocoPhillips continued its recent strategy of drilling multilateral development wells. The recently completed program was also boosted by initial development activities at the new Drill Site 2S, which came online in late 2015.
All told, ConocoPhillips drilled throughout the unit last year, including at least one well at these drill sites: 1B, 1G, 1H, 1L, 2B, 2K, 2S, 2X, 3F, 3G, 3H, 3N, 3O, 3Q and 3S.
Oooguruk and Nikaitchuq
Nearly a third of the decline in North Slope development drilling between 2015 and 2016 can be traced to the Oooguruk and Nikaitchuq units, where operations were suspended.
Caelus Natural Resources Alaska LLC drilled two wells at its Oooguruk unit in the first quarter of 2016 before suspending its development activities for the rest of the year.
The company drilled six wells at the unit in 2015, its first full year as operator after acquiring the unit from Pioneer Natural Resources Alaska Inc. in late 2014. The 2015 program had been a return to form after reduced activities at the unit in 2013 and 2014.
Before suspending its drilling program, Caelus sanctioned the Nuna development program at the unit. The company has said it hopes to resume activities this year.
After seven years of sustained development activities, Eni US Operating Co. Inc. suspended drilling work at its Nikaitchuq unit for the entirety of 2016. The company had drilled between 10 and 15 wells per year since bringing the unit online in early 2011.
The company was looking at potential expansion opportunities as oil prices started declining in late 2014. Eni has said it intends to resume development drilling this year.
Colville River and Milne Point
The Colville River unit and Milne Point were the brightest spots on the North Slope.
ConocoPhillips drilled 14 development wells at Colville River last year, the most since drilling 15 wells in 2010. But unlike previous years, where the company has developed multiple pads, the 2016 program focused entirely on the new CD-5 project. The program also included two wells that were plugged and abandoned, and later sidetracked.
The Colville River program is likely to remain strong this year, given recent announcements that ConocoPhillips plans to expand its initial development plans.
Hilcorp drilled nine development wells at Milne Point in 2016, which was more than any year over the past decade except for the 17 wells its predecessor BP drilled in 2014.
Whereas the major BP program in 2014 was focused almost entirely on developing the Kuparuk formation from F pad, the Hilcorp program last year targeted both the Schrader Bluff and Kuparuk formations and included B pad, C pad, J pad, K pad and L pad.
Drilling activity should remain strong this year. In recent months, Hilcorp has permitted several Milne Point development projects, most recently an eight-well program at F pad.
Other units
There was no drilling activity at four producing units last year: Badami, Duck Island, Nikaitchuq and Northstar. (A fifth, the Barrow gas fields, rarely has new drilling.)
Glacier Oil & Gas is scheduled to announce its development plans for the Badami unit in April. The company has been taking a cautious approach since emerging from bankruptcy last year with new owners but has also shown a willingness to invest.
Hilcorp has been focusing its North Slope resources on the Milne Point unit since acquiring properties from BP in 2014. But the company applied for new pool rules at Northstar in late 2016, which could signal the beginning of development work.
What plans Hilcorp has for Duck Island, also known as Endicott, remain to be seen.
ExxonMobil drilled one development well at the Point Thomson unit in 2016. As has been the case for decades, the future of the unit depends on larger questions about the future of the North Slope, specifically the future of North Slope natural gas sales.
