BP said June 3 that it plans to invest an additional $1 billion in Alaska and add two drilling rigs at Prudhoe Bay over the next five years “due to changes in the state’s oil tax policy signed into law last month by Gov. Sean Parnell.”
BP Exploration (Alaska) is the Prudhoe Bay field operator.
The company said its plans call for an increase in drilling and well-work activity, upgrading of existing facilities and the addition of up to 200 new jobs in the state, “giving a boost to both the company’s operations and the state’s economy.”
It also said it has secured support from the other working interest owners at Prudhoe to begin evaluating an additional $3 billion in new development projects in the west end of the Greater Prudhoe Bay Area, projects which could continue for nearly 10 years, “further increasing the state’s oil production and providing additional jobs.”
The $1 billion is a gross figure, BP Exploration (Alaska) spokeswoman Dawn Patience told Petroleum News in an email. That means all the field’s working interest owners — primarily BP, ConocoPhillips Alaska and ExxonMobil — are contributing to that total.
Patience said BP’s actual capital expenditures in Alaska “have maintained a downward trend” since 2006. The actual capital spend in 2012 was $780 million, she said, with the capital in BP-operated fields “largely flat” this year.
The actual capital expenditure in 2006 was $1.2 billion, Patience said.
She noted that the tax change becomes effective Jan. 1 of next year, and said typically BP would not release next year’s capital expenditures this early.
An important step
BP Alaska Region President Janet Weiss said in the company’s June 3 statement that the new tax law “an important step toward improving Alaska’s long-term economic future,” and credited both the governor and the Legislature for the change.
“Our announcement today should make abundantly clear that BP is committed to being a part of that future and to continuing to extend the life of North America’s largest oil field,” she said.
BP said it would issue a request for proposals this summer for the two additional rigs at Prudhoe Bay, with the first rig expected to be in place by 2015 and the second in 2016. With the two additional rigs, BP’s rig fleet in Alaska would increase to nine.
Well work is expected to be increased “as soon as the fourth quarter of 2013,” BP said, and focus on improving the performance of existing wells at Prudhoe Bay and Milne Point.
Additional opportunities
The additional development opportunities being evaluated by working interest owners are in the west end of Prudhoe Bay and include: expansion and de-bottlenecking of existing Prudhoe Bay facilities; constructing a new drilling pad; and expansions of existing pads, including the drilling of more than 110 new wells.
BP said the appraisal phase for these opportunities would take two to three years and would include engineering work and securing regulatory approvals for multiple development projects.
“Now that an improved tax structure is in place, oil and gas projects can once again move forward, keeping Alaska competitive in the midst of America’s recent energy renaissance,” Weiss said.
ConocoPhillips plans
In April, after passage of the tax bill, ConocoPhillips Alaska said it would increase its expenditures in Alaska in response to the oil tax change.
ConocoPhillips Alaska President Trond-Erik Johansen said in April that with the improvements in the state’s severance tax system the company was planning new work on the North Slope, including bringing an additional rig into Kuparuk; working with co-owners on funding a new drill site on the southwest flank of the Kuparuk River unit; and beginning regulatory/permitting activities and progressing engineering for the Greater Moose’s Tooth unit in the National Petroleum Reserve-Alaska.
ConocoPhillips Alaska spokeswoman Natalie Lowman told Petroleum News in April that the total value for the additional investments was not yet available.
In June, in response to questions about the BP announcement, Lowman said ConocoPhillips’ share of the work at Prudhoe Bay would be based on its 36.1 percent working interest ownership in Prudhoe.
She said the company hasn’t yet “assigned capital spending numbers to the projects we announced in April,” and said specific capital requirements won’t be discussed until projects are brought forward for sanction.
ConocoPhillips hopes to sanction the Kuparuk drill site, DS-2S, “in late 2014 to early 2015,” she said. “The expected timing for project sanction for the Greater Moose’s Tooth Unit is also late 2014 to early 2015, but this is also dependent on permitting and regulatory activities.”
—Kristen Nelson
