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Sunrise or sunset for ConocoPhillips in Alaska? Kevin Meyers says Alaska important to company worldwide, but state must remain competitive; resolve fiscal stability, permitting issues Kristen Nelson PNA Editor-in-Chief
Alaska remains important to ConocoPhillips, ConocoPhillips Alaska Inc. President Kevin Meyers told an Alaska Support Industry Alliance audience Oct. 17, but if the state is to continue to draw investment dollars, its fiscal policy must remain stable and it must deal with problems which make permitting projects both inconsistent and inefficient.
Referring to a slide of an exploration rig with the sun behind it, he said: “the question one has to ask, is, are we looking at the sunrise or the sunset?”
Although the company’s name has changed — from ARCO to Phillips to ConocoPhillips — “one thing through all this has remained constant and that really is our vision for Alaska and our presence and our commitment to Alaska,” Meyers said.
The company is, he noted, Alaska’s number one oil and gas producer and explorer. And within ConocoPhillips, Alaska accounts for 27 percent of worldwide reserves and 23 percent of production.
But for the company to maintain its production and reserves in Alaska, continued investment will be required. And Alaska has to compete worldwide for company investment dollars.
Internally, he said, the company works to keep its costs down and to generate economic projects. But, he said, “the state also has to do its part.” And the most important thing the state can do, he said, is to provide a stable fiscal environment. “We’ve had fiscal stability for almost 13 years now,” he said, but the state is going to be struggling with its fiscal gap over the next few years.
“And it’d be very tempting to round up the usual suspects,” he said: the oil and gas industry. But additional taxes on the state’s oil and gas industry would discourage new investment, just when the state needs to be encouraging it, Meyers said.
The state also needs to streamline “the uncertainties and inefficiencies in the permitting process,” he said. And attract new players to the state. Some new companies have been attracted by lease sales in NPR-A, he said, but new players, like existing ones, will have to carefully weigh the competitiveness of investment in Alaska, including the state’s fiscal stability, before making additional investments.
What the state does over the next few years, is “going to dictate the future of the industry in this state for the next several decades. It will determine whether the future is one of new discoveries, new jobs, new revenues for the state — or a future of managing a mature oil province as it continues to decline.”
Alaska in company’s future Worldwide, Meyers said, ConocoPhillips has roughly 47 percent of its $50 billion of assets in its upstream businesses of exploration and production. “Our objective is to grow that to about 65 percent. So we’re going to differentially invest in the upstream in the future.”
A list of company-wide projects on the upstream development side included Alaska projects in the 2002-4 time frame: Alpine and Meltwater, under development now. NPR-A was on the list of possible developments in the mid-term range, 2005-7; a long-range, 2008-11 list, included both Alaska and Mackenzie Valley gas.
In the immediate future, he said, ConocoPhillips will be spending some $800 million on Alaska projects in 2002. In 2001 it drilled 15 exploration wells, and eight wells and one sidetrack last winter, he said.
Meyers said he couldn’t yet say what exploration the company will do in Alaska this winter because budgets haven’t been approved yet: “What I can tell you is we will be out there exploring this winter.”
On the development side, work at Alpine continues, with a rig running continuously and development drilling expected to continue for several years. The company is also looking at ways to increase Alpine facilities capacity (see story in Oct. 20 issue of PNA).
Part of the facilities expansion depends on satellite development at the field: Fiord and Nanuk. Meyers said the company is discussing with the state how permitting would proceed for those developments and for NPR-A discoveries “that would be developed through the Alpine facilities.”
Those projects will not be sanctioned, he said, until the company has its permits, “and that process is going to probably be a multi-year process.”
Satellites and West Sak Other development projects under way include satellites and West Sak. Meltwater production began last November and the satellite is now producing at 7,500 barrels a day, he said.
Palm, discovered in April 2001, will be brought into production later this year.
West Sak is currently producing about 8,000 barrels a day. “Our goal is to get up to 50,000 barrels a day by the end of this decade and I think we’re pretty safely on track to make that goal,” Meyers said.
The company is looking at ways to improve economics for development of the viscous West Sak accumulation, and has already found that multilateral horizontal producers are part of the solution. ConocoPhillips has about 50 West Sak wells on line, most of them vertical wells. The six multilateral horizontal wells account for half the West Sak production. “And so we think on the producer side, we’ve got the key here: it’s multilateral wells.”
But a lot of injectors are needed to balance out the producers, he said, and the number of injectors needed meant economics for the project “started looking thin again.”
The company recently drilled its first horizontal undulating injector, with a horizontal well undulated through two horizons to provide water injection.
“If this works out, that one well saves you multiple injectors and reduces the cost,” Meyers said. “And we believe this could be a key advancement for West Sak in keeping us on track to hitting that 50,000 barrel a day goal.”
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