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Where they lead ConocoPhillips in serious discussions with agencies about NPR-A; Alaska chief Kevin Meyers says company’s commitment to Alaska exploration remains strong Kristen Nelson PNA Editor-in-Chief
It appears ConocoPhillips Alaska Inc. will be the first company to develop an oil field in the National Petroleum Reserve-Alaska. The company has not made a decision on development of its recent discoveries in NPR-A, but ConocoPhillips Alaska President Kevin Meyers told PNA in an Oct. 14 interview that his company is discussing with agencies how an EIS process for the development would work.
Phillips Alaska said in May 2001 that five wells and a sidetrack drilled over two winter drilling seasons in the NPR-A had found oil or gas and condensate in the Alpine producing horizon. Meyers said there has been some subsequent drilling, although results have not been released.
The next step is the permitting process, he said.
“Since it sits in NPR-A, it’s most likely that the permitting process will require an EIS,” which generally takes a minimum of 18 months. “And so we wouldn’t be sanctioning anything until we got our permits in hand.”
Meyers said ConocoPhillips is involved “right now” in a process discussion with both federal and state government about the EIS process: how it would work and who would be the lead agencies.
It’s a little bit like the chicken and the egg, he said: “We’re not going to go out there and pay for an EIS if we don’t have a high probability that we move forward with development. Of course, moving forward with development would be dependent on large part” on the stipulations and regulations in an EIS.
“And I would hope in the not-too-distant future we’d make a decision on whether we’re going to kick off that process.”
While a decision has not yet been made on NPR-A development, the company’s discussions with the agencies are serious discussions, Meyers said: “We wouldn’t be taking up their time if we didn’t think there was a reasonable chance that we’re going to go forward with the EIS. And we wouldn’t be doing the EIS if we didn’t think there was a reasonable chance that we’d have an economic development … assuming stipulations come in acceptable fashion.”
Alpine expansion related A related issue for the company is expansion of the Alpine facilities.
Phillips Alaska talked last year about an expansion project at Alpine and, Meyers said, “The rumors of its death have been greatly exaggerated.”
The Alpine production facility was designed to handle 70,000 barrels per day of oil and before the facilities were even commissioned the capacity had been increased to 80,000 bpd. With debottlenecking, he said, the facility handles around 100,000 bpd.
“We recognized about a year ago that the reservoir deliverability of the Alpine field itself was probably in excess of what our facilities could handle. … And we looked at a whole range of options. And the upside of those options could get you up towards 150,000 barrels a day. The downside of those options would be around 110,000 barrels a day.”
The company priced out a number of different options, Meyers said, including one project so large it would have involved sea-lift modules. When the cost estimates started coming in, “it was clear that that probably wasn’t going to fly,” he said.
How much capacity, and when? In addition to expansion cost, Meyers said, there is also the issue of capacity need.
“It became apparent that we may not see the need for the capacity quite as rapidly as we thought,” he said.
Alpine expansion will go forward, but probably as a phased expansion, not as a mega-project, and phase one will probably be sanctioned “in the not-too-distant future, but it’s going to be the first phase of what could be three or four expansions that are going to be timed with how quickly we get permits, how quickly we bring on the other potential satellites around Alpine.”
ConocoPhillips is probably a couple of years away from sanctioning satellites around the western North Slope, “because we have to get permits, because we’re probably going to have to go through an EIS,” he said.
Alpine facility expansion is also tied to development in the NPR-A. Myers said he didn’t think it was “earth shattering news” that ConocoPhillips is “looking at the potential in NPR-A that could be developed in an integrated fashion with the Alpine facilities.”
Development work will be down As for immediate plans, the company has not yet made a determination on the number of exploration wells it will drill this winter season. Meyers said that number won’t be known until budgets are set in the fourth quarter.
But the biggest change in the amount of North Slope work this winter is from the development side, he said.
Exploration is certainly part of winter work, he said, but when you look at the number of jobs, “development probably is the bigger factor.”
A lot of development work is done in the winter, he said: laying gravel, putting in pipelines, bringing up modules and facilities.
“I think the work level is going to be down this winter overall on the slope,” he said. Why? Because this winter’s work is being compared to the last few years, when there’s been a “mini-boom” going on.
That mini-boom started in 1998-99 with the miscible injection expansion project, “MIX”, followed by Alpine which came on in 2000 and the second pad at Alpine in 2001, coupled with Northstar being built, and pad development for satellites at both the Kuparuk River and Prudhoe Bay fields. There’s been a lot of activity, Meyers said.
But for this winter there isn’t a single big project. There will be development and exploration wells drilled, he said, but “right now I don’t think there’s a big project” for this winter. “I don’t know of a drill site going in this year… There’s no big new field coming on. And … that leads me to believe it’s going to be a quiet year.”
Winter exploration in planning stage Meyers said the company is still going through its budget process for winter exploration. This is nothing new, he said: it was true for ARCO, for Phillips Alaska and now for ConocoPhillips Alaska. Budgeting is finalized in the fourth quarter, which means planning has to be done for on-ice work before the budget is complete.
There won’t be a budget commitment on the company’s exploration program for another month or two, he said.
What the company does, he said, is “to permit the options we see out there.” And allow itself some flexibility, because it has partners in almost every well: “So it’s not just what we want to do, it’s what our partners want to do.” The company also needs flexibility around the weather, he said, and around what it actually finds when it drills, and around its ability to get permits for the work.
The last couple of years, he said, permits has been “almost like a triage process. We were down literally to the eleventh hour, working with, engaging often senior members of the administration to help us get a program and keep a program for the season.”
And the future?
“I mean the one thing I can say unequivocally, is that exploration will still be an important part of our business up here in the new company. That hasn’t changed. That much I can say with absolute certainty.”
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