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Phillips plans winter 2000 or 2001 drilling on Beaufort Sea prospect Worldwide, Phillips plans increased production/exploration Tom Hall PNA Staff Writer
Despite a disappointing 1998 and first quarter 1999, Phillips Petroleum Co. is looking at increased production over last year, increased exploration, and investment opportunities in the Middle East, particularly in Saudi Arabia and Kuwait.
Closer to home, Phillips Petroleum Co. hopes to begin drilling their Beaufort Sea prospect in the winter of 2000 or 2001. Jim Konst, Alaska operations manager for Phillips Petroleum Co. told the Alaska Support Industry Alliance on May 28 that Phillips has great hopes for this prospect, because the surrounding North Slope area has world-class oil and gas reservoirs.
Phillips has 21 oil and gas leases, a combination of state and federal, some 12 to 15 miles offshore in an arc from north of Prudhoe Bay to north of Badami.
Konst also said that Phillips is pleased with the May's National Petroleum Reserve-Alaska lease sale that resulted in Phillips acquiring almost 86,000 low-potential acres at a cost of a little more than $9 per acre. They also partnered with BP and Chevron for bids in the high-potential areas; their ownership in those blocks varies from 20 to 28 percent, Konst said.
Phillips is active in other areas on the Slope, primarily through their operating partners, BP, ARCO or Exxon. Konst said that the Point Thompson unit (about 60 miles east of Pump Station No. 1), a high-pressure gas condensate field operated by Exxon, is “already delineated with about 15 wells.” Because of several shallower oil and gas developments in the area like Badami, Sourdough and Yukon Gold, Konst predicted, “As this infrastructure moves closer to Point Thompson, I think we'll move a lot closer to making Point Thompson a reality as well.”
Phillips only has a 2 percent interest in Prudhoe Bay itself, but has considerably more in Prudhoe Bay satellite fields - smaller, shallower fields that lie above the Prudhoe Bay reservoir. Konst said their percentage stakes in these fields - though not confirmed - were approximately: 30 percent in Schrader Bluff, 10 percent in Northwest Eileen, 12 percent in Aurora, and 10 percent in Point Thompson. LNG pipeline progress A five-company consortium that includes ARCO Alaska as lead sponsor (with a 37 percent ownership stake), Phillips (with 12 percent), Foothills Pipeline, Marubeni Corp. and Yukon Pacific, has 15 full-time people working on the LNG pipeline project.
“We are strong believers that a gas pipeline project can be brought forward in a timely, but of course, market-sensitive manner,” said Konst.
He readily acknowledged that the project will not be without its problems. “The other projects in the world that we're competing against don't have this 800 miles of pipeline that's going to have to come down through Arctic conditions and mountain ranges,” he explained.
Konst added, however, that the sponsor group has, besides their 15 full-timers, around 50 other people throughout the companies, whose expertise they can draw on. For their part, Konst said, “Phillips brings a lot of LNG technology to the group as well as operating experience in Alaska and our LNG marketing experience in Asia.”
And though the project is a long way from reality, Konst said that they are proceeding on time and on budget. “If everything goes perfectly,” Konst said, “I think we're looking at 2007 before first deliveries are made.”
The good, the bad and the bitter pill While the Stranded Gas legislation passed last year has provided incentive for the LNG pipeline sponsor group, Konst said that other state actions (or inactions) have not been as successful. He cited House Bill 170 which calls for a feasibility study to form the Alaska Gas Corp. which would build an LNG pipeline. The goal would be to make the pipeline commercial through reduced federal, state and local taxes, and favorable government funding interest rates.
Although the sponsor group will study the bill to see if it has “potential benefit to the project,” Konst said, “...I think history tells us that such tasks are better left to free enterprise.”
Although Phillips has already successfully drilled three wells that are essentially ready to produce, its Tyonek Deep crude oil prospect in northern Cook Inlet is on hold for lack of a pipeline to shore. Royalty relief from the state (for which Konst said there is precedent), along with stable oil prices, could resurrect the project which Phillips has already written off, he said.
Konst stated that the areawide leasing sales were very important because the industry competes for exploration funds on a worldwide basis. “Access to leases on a consistent predictable basis puts us in a much better position for securing these funds to invest in Alaska.”
And like other investors in Alaska, Konst said that “a stable fiscal system that we can count on” would go a long way toward improving Phillips' investments in Alaska. He expressed disappointment in the Legislature's recent decision to hold an advisory vote on a longterm fiscal plan. “I was hoping that the Legislature was going to make a decision on the budget gap..., but unfortunately, I think they passed the decision on to us,” he said.
Konst's last bit of advice aimed at making the U.S. more competitive internationally. “In Norway and the United Kingdom, the operating costs are declining much faster than they are in the United States,” he said. “We need to continue to drive our operating costs down.”
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