Major Alaska players Oil Search and ConocoPhillips announced March 18 that they are reducing global capital spending for 2020, with ConocoPhillips taking a more long-range approach and sticking with its current 10-year plan, while smaller Oil Search is taking more aggressive steps to reduce expenditures.
Oil Search is cutting Alaska development investment from $120-140 million to $110-130 million and decreasing exploration and evaluation spending from $220-240 million to $150-170 million. ConocoPhillips is cutting capital spending just 10%, or $700 million worldwide, including about $200 million in Alaska.
What these reductions mean for Oil Search in Alaska is that while early development activities in the Pikka unit, including laying gravel roads, will be completed, all further work on the early production system for the Pikka Nanushuk development project, including ordering long lead items, will be placed on hold.
Likewise, in Alaska operations on Mitquq 1 and Stirrup 1, the two exploration wells drilled in the 2019/20 winter season, will be completed. Testing of the wells, which both discovered oil, is currently underway, with results expected to be available in late March or early April.
No further exploration activities are now planned to take place in 2020, Oil Search said.
Limited engineering work on the Pikka unit full field development will continue, so that the project is ready to move promptly towards final investment decision "when market conditions improve." Other North Slope "expenditure on seismic acquisition and G&G and G&A costs will be minimized as much as possible," Oil Search said.
The $200 million in North Slope spending cuts by ConocoPhillips for the rest of this year will be half in the Kuparuk River unit, primarily around the laying down of two rigs, and the other half in cuts "across the board" on the North Slope.
According to ConocoPhillips' executives in a March 18 market update conference call, the planned sell down of a 25% share in some of its North Slope assets is on track for late 2020.
Oil Search has decided to suspend its plans to sell a 15% interest in its Alaska assets. However, the company said, "discussions are continuing with several parties who, due to the quality of the Alaskan assets, continue to express strong interest in a purchase."
- KAY CASHMAN
See full story in March 22 issue, available online Friday, March 20, at www.PetroleumNews.com
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