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Vol. 22, No. 24 Week of June 11, 2017
Providing coverage of Alaska and northern Canada's oil and gas industry

Here for the long haul

Wilkins outlines Hilcorp’s plans for further drilling and development in Alaska

With ambitious plans for new development drilling both on the North Slope and in the Cook Inlet basin, Hilcorp Energy sees Alaska as a “great place of opportunity,” a place where the company anticipates operating for many years, David Wilkins, senior vice president of Hilcorp Alaska LLC, told the Alaska Oil and Gas Association’s annual conference on May 31.

Cook Inlet development

In addition to previously announced major development plans for the North Slope, the company anticipates some new developments in the Cook Inlet basin, potentially squeezing more oil out of the Hemlock and Tyonek formations, as well as drilling deeper into the underdeveloped West Foreland formation, Wilkins said. The company is currently processing its 3-D seismic data from the Middle Ground Shoal field, sees some additional promise in the complex geology of that field and expects to drill some new wells next year, he said.

Wilkins also commented that his company is very enthusiastic about the horizontal drilling redevelopment program it is conducting in the Granite Point field and will be starting drilling in that field in June.

Onshore on the Kenai Peninsula Hilcorp continues drilling at an annual rate sufficient to maintain natural gas production to meet market demand. The company also anticipates some exploration drilling.

“We will also be drilling exploration wells on the Kenai Peninsula in search for large gas fields that we are confident exist,” Wilkins said.

Recent problems

Wilkins also reflected on the problems that Hilcorp has faced in Cook Inlet in recent months over a gas leak from a subsea gas line and a minor oil spill at the Anna platform.

“This past winter was certainly challenging and one that brought a lot of negative attention, not only to Hilcorp, but to our industry as a whole,” Wilkins said.

He said that he was proud of the manner in which his team had responded to the Cook Inlet incidents, with every team member taking the right actions, and with the company self-reporting on the problems while also working in lock step with the regulators. The company remained open, honest and transparent throughout the incidents, he said.

“I can’t guarantee that we won’t have incidents in the future, but I will promise you that my team is doing everything in its power to learn from what has happened and to prevent incidents like this from happening again,” Wilkins said.

Wilkins also commented on his company’s recent announcement of a plan to close down the Drift River terminal on the west side of the inlet by shipping oil by subsea pipeline to the Kenai Peninsula. The Drift River terminal is a cause for safety concern because of its proximity to the Redoubt volcano. The oil pipeline plan demonstrates Hilcorp’s commitment to environmental stewardship and a willingness to work cooperatively, investing to overcome the challenges of the aging infrastructure, he said.

The North Slope

Wilkins reviewed his company’s upcoming plans for the North Slope, where Hilcorp operates the Milne Point, Northstar and Endicott fields, as well as being the operator for the planned Liberty oil field development, offshore in the Beaufort Sea.

“On the North Slope we are particularly bullish on the opportunities at Milne Point, where we believe a significant resource still remains to be recovered, from light oil trapped in deep reservoir rocks to heavy oil in the shallower Schrader Bluff and Ugnu formations,” Wilkins said. “We see plenty of reasons for investment and hundreds of wells yet to be drilled.”

Hilcorp is building a new pad, the Moose Pad, on the west side of the Milne Point unit. The company estimates ultimate recovery of 30 million to 50 million barrels of oil via the pad, with production of 15,000 barrels per day from as many as 70 production and injection wells, Wilkins said.

Hilcorp commissioned the new Innovation drilling rig that is now drilling at Milne Point. This is the lightest modular rig on the North Slope and is capable of drilling closely spaced wells, a factor that will enable the rig to operate at Endicott and Northstar, Wilkins said.

The Bureau of Ocean Energy Management will soon release the environmental impact statement for the Liberty project - Hilcorp is working diligently with regulators in Alaska and Washington, D.C., to bring this project to fruition, Wilkins said. The field holds an estimated 100 million barrels of oil and is expected to produce at a rate of at least 60,000 barrels per day for 10 to 15 years.

Wilkins commented on disappointment that Liberty has become a target for what he characterized as anti-development groups that want to permanently close the region to oil and gas activity. These attempts to lock up Alaska’s resources ignore the national and local benefits of greater energy security, job creation and new government revenue streams, he said.

“The opposition also ignores what we find most attractive about Liberty - the use of technology that’s been proven environmentally sound for more than 30 years,” Wilkins said, referencing his company’s decision to develop the field from an artificial island, a technique successfully used at Endicott, Northstar, Oooguruk and Nikaitchuq.

“We believe that we have chosen the most prudent development plan available,” he said.

Rigs and Alaska jobs

Overall, Hilcorp currently has four drilling rigs operating in Alaska - one on the North Slope, one onshore on the Kenai Peninsula and two offshore in Cook Inlet. Each rig accounts for about 100 drilling jobs, a high proportion of which are held by Alaskans, Wilkins said.

In characterizing his company’s approach to its Alaska endeavors, Wilkins referenced the Swanson River field, the oil field on the Kenai Peninsula that triggered Alaska’s eventual oil and gas bonanza. He hopes that Hilcorp exhibits the same perseverance and hard work that brought about that initial Swanson River development by a group called “the Spit and Argue Club.”

“These were men who liked to think big, think positive and think long term,” Wilkins said.

With Swanson River being an important source of natural gas, as well as an oil field, Hilcorp plans to drill more wells this year, and five to 10 further wells next year. The company has also re-instituted a gas flood program in the field. And, since arriving in Alaska, Hilcorp has boosted oil production from the field from 500 barrels of oil equivalent per day to more than 2,500 barrels per day.

“The story at Swanson River parallels Hilcorp’s commitment to Alaska,” Wilkins said. “We’re here for the long haul. We look forward to being good neighbors for many, many years to come.”

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