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Vol. 19, No. 46 Week of November 16, 2014
Providing coverage of Alaska and northern Canada's oil and gas industry

The Producers 2014: ConocoPhillips gets busy on North Slope development

The dominant North Slope operator is planning to expand or initiate development at three of its four units

Eric Lidji

For Petroleum News

ConocoPhillips is in the early stages of what is perhaps its broadest development campaign on the North Slope since the company was created through a 2002 merger.

The Houston-based giant, which bills itself as “the world’s largest independent E&P company,” is either expanding or initiating development at three of its four North Slope units: the state Kuparuk River unit, the state Colville River unit and the federal Mooses Tooth unit.

The company has also been engaged in exploration at its federal Bear Tooth unit.

The work follows several fallow years. ConocoPhillips attributed the uptick to recent revisions to the state fiscal system for oil production. With that system having recently withstood a ballot measure to repeal it, ConocoPhillips now must prove its intentions.

Kuparuk history

The Kuparuk River unit includes the main Kuparuk oil field and four satellites.

Sinclair Oil and Gas discovered the Kuparuk River oil pool in 1969 and ARCO Alaska sanctioned development a decade later, by which time the trans-Alaska oil pipeline was already delivering oil production from the neighboring Prudhoe Bay unit to the east.

Economics caused the delay. It took crimped domestic oil supplies and the subsequent rise in prices at the end of the decade to persuade top management to develop Kuparuk.

The program called for bringing 20 square miles of the Kuparuk field online by 1982 and working with nearby leaseholders on a longer-term plan to develop 200 square miles.

The Kuparuk River field came online in late 1981 and production peaked at 339,386 barrels per day in December 1992, according to the Alaska Oil and Gas Conservation Commission. Originally, engineers had expected peak production of 250,000 bpd.

After ARCO left the state, Phillips Alaska Inc. became the operator of the Kuparuk River unit. ConocoPhillips took over after Conoco Inc. and Phillips Alaska merged in 2002.

In the 22 years since the unit hit peak production, those operators have been pursuing various programs to expand development and improve production through technology.

The entire Kuparuk River unit produced some 2.5 billion barrels through July 2014.

The Kuparuk field

At the end of 2013, ConocoPhillips was developing the main Kuparuk field with 817 active wells at 44 drill sites, according to a June 2014 plan of development.

The field had 821 active wells at 44 drill sites at the end of 2012.

ConocoPhillips drilled 15 wells in the Kuparuk participating area last year - one rotary well and 14 coiled tubing wells with a total of 41 laterals. The program added some 4,520 gross barrels of peak incremental oil production per day, according to the company.

By comparison, the company drilled 14 wells and 53 laterals at the Kuparuk field in 2012, bringing 5,050 gross bpd of incremental production online. A June 2013 plan of development had identified as many as 17 coiled-tubing drilling candidates for last year.

ConocoPhillips also added 2,601 gross barrels per day through a rigged workover program and another 10,300 gross barrels per day through a rigless workover program.

The Kuparuk participating area averaged 85,700 gross barrels per day in 2013.

For the current year, ConocoPhillips said it planned to drill between six and eight new rotary wells and between 13 and 17 new coiled tubing sidetracks. The proposed well locations are scattered across the field with a large cluster along the southern border.

The largest project under way at the Kuparuk field is the construction of Drill Site 2S, which would develop the Kuparuk formation in the southwest corner of the field.

ConocoPhillips began laying gravel at the drill site in February and intends to seek internal and partner approval for the project by the end of the year. If approved, construction would be next year with the goal of bringing the drill site into production by the end of 2015. The project is expected to cost some $595 million, accommodate 24 wells and produce 8,000 gross bpd of oil at its peak, according to the company.

Alongside the drilling program, ConocoPhillips has long been overseeing a miscible water-alternating-gas enhanced recovery program from 26 drill sites at Kuparuk. The miscible injectant currently includes natural gas liquids imported from Prudhoe Bay.

The main Kuparuk field produced 2.33 billion barrels of oil through July 2014.

With the expected increase in activity, ConocoPhillips applied this year to expand the Kuparuk Industrial Center and the Kuparuk Construction Services pads at the unit. The company said it had been outsourcing some work to Deadhorse to make up for the lack of adequate space at the two support pads. ConocoPhillips told regulators that its workload a Kuparuk had increased between 4 and 4.5 percent each year over the past 20 years.

The West Sak field

ARCO discovered the shallow West Sak oil pool in 1971, appraised the feasibility of producing the viscous oil with a 15-well pilot project between June 1983 and December 1986 and brought the satellite into production from Drill Site 1D in December 1997.

The pool covers much of the eastern half of the Kuparuk River unit, stretching into the Milne Point unit and the northwest corner of the Prudhoe Bay unit at the north and fanning out at the south to extend beyond the southern border of the Kuparuk River unit, making it a regional asset of interest to various operators and working interest owners.

At the end of 2013, ConocoPhillips was developing the West Sak oil pool with 96 active wells at six drill sites, according to the most recent plan of development. West Sak shares all six of its drill sites - 1B, 1C, 1D, 1E, 1J and 3K - with the main Kuparuk field.

West Sak had 102 active wells at the end of 2012.

After several years of conventional drilling, ConocoPhillips began a multilateral program at West Sak starting in 2000. Those wells became increasingly complex over the following decade, with tri-lateral wells and undulating wells designed to target more of the formation. ConocoPhillips also expanded pad infrastructure at West Sak. Altogether, the heavy-oil development program was estimated to have cost some $500 million.

Although “the pace of future West Sak development has slowed while the performance of recent developments in evaluated,” as ConocoPhillips told state regulators in the most recent plan of development, ConocoPhillips is poised for another major program. The company is planning six wells for Drill Site 1D and a smaller program at Drill Site 1C.

The company also continues to study a $450 million program to expand the existing Drill Site 1H. The 9.45-acre expansion would accommodate five new production wells and 13 new injection wells, and associated infrastructure. With approval this year, the expansion could come online by early 2017 and would produce some 9,000 gross bpd at its peak.

West Sak produced some 15,772 bpd in 2013, up from 14,185 bpd in 2012. Cumulatively through July 2014, the field had produced some 71.7 million barrels of oil.

To accommodate the expected activities at both Drill Site 2S and Drill Site 1H, ConocoPhillips recently contracted Doyon Drilling to build Doyon 142, the first new-build rotary rig added to the Kuparuk fleet since 2000, according to the company. The rig will have the capability to work at both Kuparuk and at the neighboring Alpine field.

ConocoPhillips added Nabors 7ES and Nabors 9ES to its fleet in May 2013 and January 2014, respectively. Once those three rigs are operational, the fleet could be as large as seven come 2016 - up from an average fleet of four rigs between 2008 and 2012.

The Tarn field

ARCO discovered the Tarn oil pool in the southwest corner of the Kuparuk River unit in 1991, confirmed the accumulation in 1997 and brought it into production in June 1998.

At the end of 2013, ConocoPhillips said it was developing the Tarn oil pool with 61 active wells at two drill sites, 2N and 2L. Tarn had 63 active wells at the end of 2012.

ConocoPhillips deferred three grassroots rotary wells and one rotary sidetrack planned for 2013 to this year because of “rig compatibility and availability issues,” the company said. The current plan of development lists four rotary wells and two rotary sidetracks on the agenda for this year and next year. All six wells would be horizontal or directional.

The Tarn oil field produced some 5,600 gross bpd in 2013, down from some 7,100 bpd in 2012. Cumulatively, the field had produced 111 million bpd through July 2014.

Tabasco, Meltwater and Palm

ARCO discovered the Tabasco oil pool 1986 through regular development drilling at the 2T pad at the western edge of the unit and brought the field into production in May 1998.

At the end of 2013, ConocoPhillips was developing Tabasco from seven active wells at Drill Site 2T. Tabasco had eight active wells at the end of 2012. ConocoPhillips has drilled 12 wells at the field - nine producers and three injectors. Of the producers, ConocoPhillips took four offline because of high water production, low oil production or mechanical problems. One of the injectors was taken offline for reservoir management.

Tabasco produced some 1,711 gross bpd in 2013, up from 1,076 bpd in 2012, according to ConocoPhillips. Cumulatively, the field produced 18.2 million bpd through July 2014.

While Drill Site 2T has eight empty slots for production wells and two empty slots for water injection wells, ConocoPhillips is not planning any delineation for the time being.

That said, ConocoPhillips is currently updating its full field model for Tabasco, which could identify potential development opportunities for the satellite going forward.

ARCO discovered the Meltwater oil pool in 2000 and Philips brought the field online in November 2001 from Drill Site 2P, some 10 miles southwest of the unit boundaries.

At the end of 2013, ConocoPhillips was developing Meltwater from 15 active wells at Drill Site 2P, the same development profile in place at Meltwater at the end of 2012.

Meltwater produced some 1,971 gross bpd in 2013, down from some 2,719 gross bpd in 2012. Cumulatively, the field had produced nearly 18.1 million bpd through July 2014.

The most recent Meltwater drilling campaign ended in 2004, but ConocoPhillips said it is currently analyzing future development opportunities at Meltwater in light of “new seismic data, recent surveillance findings, absence of injection water supply and business climate.” Those opportunities include coiled tubing drilling and converting existing wells.

Phillips Petroleum discovered the Palm accumulation at the far western edge of the Kuparuk River unit in 2001 and ConocoPhillips built the 3S pad in November 2003.

In early 2013, ConocoPhillips conducted a perforation and hydraulic fracture pilot test at the existing DS 3S-19 well to evaluate the Cretaceous Brookian Moraine interval. In its most recent plan of development, ConocoPhillips said it is still analyzing those results.

The Colville River unit

The Kuparuk River unit has allowed ConocoPhillips to advance westward and develop fields that might have been uneconomic on their own because of their remoteness.

The nearest of those fields are at the Colville River unit, which includes the main Alpine field at the CD-1 and CD-2 pads, and four satellites: Fiord at the CD-3 pad, Nanuq at the CD-4 pad, Qannik at an expanded CD-2 and Alpine West at the upcoming CD-5 pad.

ARCO Alaska discovered the Alpine oil pool in 1994 and determined commerciality in 1996. Along with partners Anadarko Petroleum Corp. and Union Texas Petroleum Alaska Corp., ARCO proposed a $700 million to $800 million development program.

Through mergers and acquisitions, ConocoPhillips now operates the unit and owns a 78 percent working interest, with Anadarko owning the remaining 22 percent interest.

The partners originally estimated that the field contained 365 million barrels of recoverable oil but increased the reserve estimate to 429 million barrels in 1997. By carefully managing the Alpine field and its satellites, ConocoPhillips has been able to develop and expand the Colville River unit using its existing processing facilities.

The unit has five participating areas: Alpine, Fiord Nechelik, Fiord Kuparuk, Qannik and Nanuq. A sixth, Nanuq Kuparuk, has since been incorporated into Alpine. The entire Colville River unit produced some 473 million barrels of oil through July 2014.

The Alpine field

The initial development of the Alpine participating area from the CD-1 and CD-2 pads ended in November 2005 and a peripheral development program of the Alpine A and C sands began from the CD-4 pad in 2006. Now, the primary activity is completion work.

Not counting sidetracks and re-drills, ConocoPhillips has drilled 142 wells between the two Alpine participating areas - 133 at Alpine and nine at Nanuq Kuparuk.

ConocoPhillips is considering six development wells at the Alpine participating area for the coming year - three producers and three injectors. The company performed nine fracture stimulations at Alpine wells in 2013 and is planning four stimulations this year.

While the Alpine participating area primarily produces from the Alpine reservoir, ConocoPhillips recompleted two CD-1 wells in 2008 to produce from the Kuparuk reservoir on a tract basis. The company is considering additional Kuparuk production.

Alpine produced 38,900 bpd in 2013. Cumulatively, the participating area produced 409.5 million barrels through July 2014. Nanuq Kuparuk produced 1,700 bpd in 2013. In 2012, Alpine produced 45,300 bpd and Nanuq-Kuparuk produced 2,400 bpd.

In August 2014, the Alaska Department of Natural Resources began a mandatory contraction of the Colville River unit, which had been built into the unit agreement. The contraction was supposed to occur after 10 years of development, but the state had agreed to defer the 18,045-acre contraction if ConocoPhillips met a drilling commitment. Even with the commitment, which ConocoPhillips met, the contraction was to occur this year.

Fiord, Nanuq and Qannik

ARCO discovered the Fiord oil pool in 1992, although it had encountered the pool through previous drilling as early as 1982. ConocoPhillips sanctioned development in 2004, as it was expanding Alpine facilities, and brought the field online in 2006.

Not counting sidetracks and re-drills, ConocoPhillips has drilled 29 wells between the two Fiord participating areas - 22 at Fiord Nechelik and seven at Fiord Kuparuk.

The company drilled the CD3-127 well at Fiord Nechelik in 2013 and planned to drill two wells this year and two more next year. Of the seven Fiord Kuparuk wells, only five are currently active. ConocoPhillips has no plans to add more in 2014 or 2015. The company fracture stimulated four Fiord wells in 2013, which “resulted in an appreciable production rate increase.” The company “tentatively” planned to fracture stimulate one well this year. The development plan at Fiord calls for as many as 32 active wells.

Fiord Nechelik produced 16,200 bpd in 2013. Cumulatively, the participating area had produced 41.7 million barrels through 2013, according to ConocoPhillips. Fiord Kuparuk produced 2,200 bpd in 2013. Cumulatively, the participating area had produced 12.1 million barrels through 2013, according to ConocoPhillips. Together, the two participating areas had produced 56.7 million barrels through July 2014, according to the Alaska Oil and Gas Conservation Commission, which combines the two for tabulation.

In 2012, the two participating areas produced some 20,100 bpd.

ARCO Alaska discovered the Nanuq oil pool in 1996 and ConocoPhillips brought the field online in 2006. The AOGGC incorporated Nanuq-Kuparuk into Alpine in 2009.

Not counting sidetracks and re-drills, ConocoPhillips has drilled eight wells at Nanuq, including three drilled 2013. The company mentioned no plans for the current year.

Nanuq produced 1,300 bpd in 2013 and 2.3 million barrels through July 2014.

In 2012, the field produced some 1,000 bpd on average.

ARCO encountered the Qannik oil pool as early as 1996 but believed the reservoir was too tight and too thin to be productive. ConocoPhillips proved the feasibility of the pool through an appraisal program in 2005 and 2006 and brought the field online in 2008.

Not counting sidetracks and re-drills, ConocoPhillips has drilled nine wells at Qannik, which might be all for the time being. The company did not drill any new wells at the field in 2013 and had no plans to drill new wells this year. Furthermore, the company has told regulators that it sees “no potential near-term drilling opportunities” for the field.

Qannik produced 1,800 bpd in 2013 and 4.6 million barrels through July 2014. In 2012, the field produced some 1,800 bpd.

CD-5/Alpine West

In a 2003 environmental impact statement, ConocoPhillips proposed five Alpine satellites: Fiord, Nanuq, Alpine West, Lookout and Spark. The company also mentioned 10 additional oil accumulations within 30 miles of Alpine that could be future satellites.

ConocoPhillips drilled an Alpine West exploration well directionally from the CD-2 pad in 2001 but wanted to develop the field from a CD-5 pad. The proposed pad was to be located across the Nigliq Channel of the Colville River from the existing Alpine facilities.

The proposed bridge across the Nigliq Channel spawned years of debate, first with local groups and later with the U.S. Army Corps of Engineers. The sides finally reached an agreement in late 2011 and ConocoPhillips sanctioned the CD-5 project in late 2012.

Construction began in early 2014. ConocoPhillips expects to begin drilling by the middle of next year and bring the satellite into production by the end of next year. The current development program calls for drilling 15 horizontal wells - six producers and seven injectors into the Alpine A sand and one producer and injector into the Kuparuk sands.

Environmental aspects of the development are currently tied up in federal court.

Greater Mooses Tooth

ConocoPhillips originally envisioned Lookout and Spark as Alpine satellites, even though the fields are in the federally managed National Petroleum Reserve-Alaska.

After the U.S. Bureau of Land Management formed the Greater Mooses Tooth unit in 2008, ConocoPhillips changed the names of the CD-6 and CD-7 pads to GMT-1 and GMT-2, respectively, to better distinguish between state and federal developments.

As CD-5 moved forward, ConocoPhillips updated its plans for CD-6/GMT-1.

In July 2013, the company submitted a proposal to regulators calling for an 11.8-acre gravel pad with the capacity for 33 wells. A 7.8-mile gravel access road would connect the GMT-1 pad to the CD-5 pad. The road would also accommodate pipelines, power lines and other associated infrastructure, which would ultimately connect back to the existing Alpine facilities. ConocoPhillips expects to bring the field online by late 2017.

The estimated $890 million project would produce 30,000 bpd day at its peak, according to ConocoPhillips, which will seek internal and partner approval by the end of the year.

The proposal was “very similar” to the original Alpine CD-6 pad the BLM approved in its 2004 decision, according to BLM, but included some “notable changes,” including a new location for its drill site, which would require longer roads, bridges and pipelines.

Those changes required BLM to produce a supplement to its 2004 Alpine Satellite Development Plan environmental impact statement. The supplemental EIS will also consider environmental studies conducted since 2004, such as the regional climate change assessment for the NPR-A, the recent Integrated Activity Plan for the NPR-A and the listing of the polar bear as a threatened species under the endangered species act.

The supplemental EIS will also consider future drilling, such as a GMT-2 pad.



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