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BP, ARCO moving ahead with Alaska projects for 2000 BP Exploration (Alaska) ready to sell assets, work with new partners; ARCO Alaska may have a few new discoveries up its sleeve Kristen Nelson PNA News Editor
BP Exploration (Alaska) Inc. will invest more than $600 million in Alaska in 2000, a 50 percent increase over 1999 spending, Richard Campbell told the Alaska Support Industry Alliance’s Meet Alaska conference Jan. 28.
ARCO Alaska Inc.’s capital spend for Alaska for 2000, said Kevin Meyers, will be $475 million.
“New opportunities created by completion of the ARCO deal could drive capital spending even higher,” said Campbell, president of BP Exploration (Alaska).
Developing Northstar accounts for about 50 percent of the BP Amoco spend in 2000, he said. Other investments include: testing satellite accumulations at Prudhoe Bay and Kuparuk, acquiring 3-D seismic data over a broad area west of Kuparuk; increasing the pace of development drilling in existing fields; and working to advance the commercialization of North Slope natural gas.
ARCO dollars driven by new field development
Meyers, president of ARCO Alaska, said the company’s 2000 capital expenditures include the company’s National Petroleum Reserve-Alaska winter exploration, satellite exploration, start up of the Alpine field, start up of Point McIntyre enhanced oil recovery and conceptual engineering for Aurora and Fiord.
The company’s first millennium class tanker, which will join the Alaska trade later this year, is not included in the $475 million, Meyers said.
Meyers noted that ARCO’s 2000 capital investment in Alaska “will probably be down about $60 million from what we spent in 1999. But it’s important to note,” he said, “it’s about two and a half times what we spent annually from ‘94 through ‘96.”
Development spending, he said, has remained about the same. Increases in ARCO’s investment in the state in the 1998-2000 time frame have been driven by new field and satellite development, exploration spending and big lease sales like the first state North Slope areawide sale and the federal sale in the NPR-A.
“It’s important to note, because that’s what drives the investment — that’s a long lead time that really drives our investment in Alaska,” Meyers said.
“We’ve got to keep doing those big projects,” he said. “We’ve got to keep doing exploration. We’ve got to continue to explore. We’ve got to continue to fill the pipeline. We’ve got to continue to put things in there so you can keep the capital expenditure — keep the investment up in Alaska.”
BP 2000 focus on Northstar, seismic Campbell said that BP Exploration (Alaska)’s 2000 focus will be on completing the ARCO merger, integrating Alaska operations and beginning to implement the charter which the companies signed with the state.
“A lot of preparation has been done already,” Campbell said, “and we are set to move when given the go ahead.
“We have taken steps to quickly complete the asset sales required under our agreement with the state and we are ready to work with our new partners.”
While waiting for resolution of the combination with ARCO, Campbell said, BP will be moving forward “with the investment opportunities available to us today.”
The $600 million capital investment BP will make in Alaska in 2000 is a 50 percent increase over spending in 1999, he said.
“New opportunities created by completion of the ARCO deal could drive capital spending even higher,” Campbell noted.
Development of Northstar accounts for about 50 percent of the 1999 spend. Also included are: testing satellite accumulations at Prudhoe Bay and Kuparuk, acquiring 3-D seismic data over a broad area west of Kuparuk; increasing pace of development drilling in existing fields; and working to advance commercialization of North Slope natural gas.
Northstar gravel island in 2000 Campbell said that after three and a half years of litigation and permitting delays, more than 700 Alaskans will soon be at work on the Northstar project in Anchorage, Fairbanks and on the North Slope. North Slope work for this winter, he said, includes the five-acre gravel island from which the Northstar field will be produced and the pipeline.
Fabrication work, he said, is under way in Anchorage at two fabrication yards, Alaska Petroleum Contractors and VECO, including assembly of camp facilities and utilities modules at the Port of Anchorage. When those facilities are barged out of Cook Inlet this summer, Campbell said, “work will begin immediately on the oil and gas processing facilities required for field development. These will be,” he said, “the largest production facilities ever built in Alaska.”
Campbell noted that the investments BP made at the Port of Anchorage made it possible to build the MIX module in Alaska, and said he was proud of the fact that BP Amoco stayed with the Northstar project, “worked through every obstacle… and kept every promise we’ve made.”
More CT sidetracks In addition to work on Northstar, Campbell noted that mature fields continue to attract new investment. “More and more,” he said, “the level of investment will be driven by technical advances that lower our costs.”
At Prudhoe Bay, he said, coiled tubing “has become the preferred option for low-cost development drilling.”
In 2000, he said, the goal is to increase the number of coiled tubing sidetracks at Prudhoe Bay by 50 percent. “Not by adding new drilling units,” he said, “but by making better use of the drilling units we already have.”
ARCO replaces Alaska reserves Meyers told the Alliance audience that ARCO replaced reserves in Alaska by more than 100 percent for the third year in a row in 1999.
A Feb. 7 statement from the company provided details: worldwide ARCO replaced 129 percent of its 1999 production, while ARCO Alaska replaced 139 percent of its reserves in 1999, including: 65 million barrels of oil equivalent at the Kuparuk field as a result of improved recovery and revised estimated; 40 million barrels from the 1999 Fiord and Aurora discoveries; and 12 million barrels from revisions at the Alpine field.
In 2000, Meyers told the Alliance, ARCO Alaska will work on the following: completion of the combination of BP Amoco and ARCO; the NPR-A winter exploration program; satellite exploration; start up of the Alpine field; start up of Point McIntyre EOR; conceptual engineering for Aurora and Fiord. In addition, the first millennium-class tanker will join the company’s Alaska fleet.
Work in the interim Meyers emphasized that closing the merger comes first on ARCO’s priority list. But, he said, until closure comes, ARCO Alaska will continue to work on the company’s assets in the state, continuing plans the company has had in place.
The $475 million capital to be invested in Alaska in 2000 includes Alpine, Point McIntyre EOR, winter exploration and continuing drilling at the Kuparuk and Prudhoe fields, Meyers said.
The company’s 2000 exploration program is budgeted at about $50 million, Meyers said, and includes one 3-D seismic crew. The two or three wells in NPR-A, he said, are Moose’s Tooth, Clover and potentially Rendezvous. Rendezvous is potential, he said, “because we’re getting a late start, we just got the permits today, so it just depends how much winter time we’re going to have as to how many wells we can drill. So we’re pretty hopeful we’ll get two in and we may actually be able to get three wells in out at NPR-A.”
In addition to NPR-A, ARCO plans to drill or participate in three to seven satellite wells. The Nanuk will be drilled with ARCO’s partner Anadarko Petroleum Corp. Potentially Nanuk would be a satellite to Alpine, he said.
At Meltwater North (south of Tarn) and West Gwydyr Bay, Meyers said, ARCO is participating with BP Exploration (Alaska). The Nanuk, Meltwater North and West Gwydyr Bay wells “are definitely in the bag,” Meyers said.
Additional wells will depend on partner approval, how long the season is and whether or not some permits — still outstanding — are received. These additional wells are not new field wildcats, he said, but satellites to existing fields.
Conceptual engineering to begin in 2000 Meyers said that ARCO will begin conceptual engineering for the Fiord and Aurora fields, discoveries the company announced last year. Fiord is north of the Alpine field and estimated to contain more than 50 million barrels of proven and potential reserves, he said. It would be the first satellite field to Alpine.
ExxonMobil and Phillips Petroleum Co. are partners with ARCO in Aurora, the other new field, estimated to contain 20-35 million barrels of recoverable oil.
There is also a pilot at the ARCO, BP, Chevron, ExxonMobil and Phillips’ Schrader Bluff Prudhoe Bay satellite, Meyers said. So far, he said, “that pilot’s doing quite well.”
In the fall of 2000, waterflood injection will begin at another Prudhoe Bay satellite, Midnight Sun. Test production began at the field in 1998 and it is estimated to contain 30-50 million barrels of oil.
The Point McIntyre enhanced oil recovery project will also start this year, Meyrs said. “The EOR project incorporates a state-of-the-art compressor technology and it will improve the ultimate Point Mc oil recovery by more than 32 million barrels and that translates into increased production of about 5,000 barrels a day by 2006.”
Nine rigs in February By the time drilling activities begin in NPR-A, Meyers said, ARCO will have five rotary rigs operating on the North Slope. “Across the slope they’ll be seven rotary rigs and in addition BP and ARCO each will be running a coiled tubing drilling rig,” he said for a total of nine pieces of equipment working by the end of February.
The Alpine field is scheduled to come on line in the third quarter at 40,000 barrels per day, Meyers said, and to reach 80,000 barrels per day by the end of the year. Current reserve estimates at Alpine are 429 million barrels. Total investment at the field is expected to top one billion dollars, he said, with more than $750 million spent in Alaska.
Alpine is 85 percent complete and on schedule, Meyers said. Facilities for Alpine were sealifted to the North Slope in August.
“They’re currently sitting at Kuparuk and we’re doing functional checkout work on them. As soon as the winter ice roads are ready, we’ll do an ice lift, if you will, we’ll roll them over to Alpine.”
“Altogether there are over 1,000 people working on Alpine as we speak…. To give you a feel for what 1,000 people translates to, right now the project is spending over a million dollars a day. It really sinks in how much a project can cost when you think of that in terms of a million dollars a day…
For a number of years, ARCO Alaska has been working to reverse the decline in its net North Slope production. “It’s become, really, part of our culture at ARCO,” Meyers said.
If ARCO had been around in 2001, he said, “we’d actually have seen an increase in production from the current projected forecast for this year of 325,000 barrels a day.” The assets may have different owners by that time, he said, “but the goal is going to be achieved nonetheless.”
The ARCO Endeavor, the company’s first millennium-class tanker, will enter the trade this year. Each of the three tankers cost about $150 million.
Progress on natural gas Meyers told the Alliance that there has been progress on moving North Slope natural gas to market. The sponsor group includes Foothills Pipelines, Marubeni Corp., Phillips Petroleum, ARCO, he said, noting that “just last month BP Exploration joined the sponsor group.”
The sponsor group, he said, has focused on “a smaller start-up project, something in the 7 million tons per year, and looking at export routes either to Cook Inlet or to the Port of Valdez.”
ARCO and Syntroleum Corp. completed a gas-to-liquids pilot plant at ARCO’s Cherry Point refinery in 1999, Meyers said, “and though I can’t disclose the results of that test, I think it would be safe to say we were pleased.”
The GTL technology, he said, would convert natural gas into middle distillates on the North Slope and ship to down the existing trans-Alaska oil pipeline.
Also in 1999, he noted, there was discussion about potential pipeline routes to the Lower 48.
“So right now we’ve got LNG being talked about. We’ve got GTL being talked about by more than one company. We’ve got pipeline routes to the Lower 48 being talked about. It gives you a lot of hope that we may eventually get this gas to market. And I’m still a firm believer that we’ll get this gas to market before the end of the current decade,” Meyers said.
ARCO Alaska’s bottom line, he said, is delivering “a strong and vibrant company to our merger partner” and fulfilling our commitment to the state.
“And yes, as you can see,” Meyers said, “ARCO’s name is still on the building and business is still going on. We’re still producing oil and we still have to operate safely, each and every day. And maybe, depending on how fast this merger closes, we may even still have a few new discoveries up our sleeve.”
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