THE EXPLORERS 2006 - Conoco’s exploration plans shaping up

Kay Cashman

Petroleum News

ConocoPhillips Alaska is gearing up to drill oil exploration wells on Alaska’s North Slope during the upcoming 2006-07 winter drilling season, but because the company is not yet publicly saying how many or where until its budget is approved the following information is gleaned from permit applications and interviews with permitting agency staff who have talked to Conoco.

It’s a safe bet to say at least 13 exploration wells will be drilled on the North Slope this winter, and possibly as many as 18, by six companies, including Conoco, which is expected to drill in both the Northwest and Northeast planning areas of the National Petroleum Reserve-Alaska and possibly northeast of Alpine.

In an October exploration preview, Petroleum News predicted Conoco would drill a total of two to four wells.

Intrepid and Noatak

According to paperwork filed by Conoco the company will be using the Kuukpik No. 5 drilling rig in NPR-A and has 65 rolligon loads planned for the 240-mile trek to its Intrepid prospect.

Permitting agencies have been told one of three scenarios is possible in NPR-A:

1. Conoco will drill one Intrepid well, be disappointed with the results, and on the way back to its starting point — Meltwater drill site 2P — stop at Conoco’s Noatak prospect south of Teshekpuk Lake in NE NPR-A and drill a second well;

2. Conoco will drill a well at Intrepid, be pleased with the results, drill a second Intrepid well, and then if there is time on the way back to 2P, drill a third well at Noatak;

3. Conoco will drill a well at Intrepid, be pleased with the results, drill a second well and overwinter the drilling rig at a nearby staging area for use at Intrepid the following winter.

Conoco is looking at permitting three wells at the Noatak location, which is just north of the two Kokoda wells the company previously drilled in NE NPR-A, southeast of Teshekpuk Lake.

From west to east headed back to Meltwater, the remaining well locations on Conoco’s 2006-07 exploration map are two wells at the Nugget prospect, which is south and a little west of the Trailblazer wells drilled by BP; three wells at the Cassin prospect, north and a little west of the Moose’s Tooth C well; and four wells at the Spark prospect, just south of the Spark 1 well and west of the Rendezvous A well.

But with just one drilling rig, the company will be lucky to get two or three wells drilled, agency officials said.

Makua outside NPR-A

As of Oct. 18, 2006, there has been no indication from Conoco that it intends to drill exploration wells at Makua this winter — or anywhere else outside NPR-A. But the company has two Doyon rigs available to it in the Kuparuk and Colville units that could conceivably be used to drill one or more of those wells.

A. Jim Bowles, president

Q. Full-time employees in Alaska?

A. 1,000 employees statewide (Anchorage, North Slope, Kenai, Cook Inlet)

Q. Do you anticipate hiring more employees in the next 12 months?

A. Yes, all external vacancies are posted through the Anchorage Job Center Network on Alaska’s Job Bank and are also regularly advertised in local papers.

Q. Goods and services purchased in Alaska in 2005?

A. In 2005, ConocoPhillips spent approximately $663 million on goods, services, and transportation with Alaska-based companies.

Q. Parent company?

A. (Houston-based) ConocoPhillips is an international, integrated energy company. It is the third-largest integrated energy company in the United States, based on market capitalization, oil and gas proved reserves and production; and the second-largest refiner in the United States. Worldwide, of non-government controlled companies, ConocoPhillips has the fifth-largest total of proved reserves; and based on crude oil capacity, is the fourth-largest refiner.

Alaska exploration history

Q. First ConocoPhillips-operated exploration well in Alaska?

A. ConocoPhillips heritage company Phillips Petroleum became one of the first American companies approved by the U.S. Department of the Interior to drill in Alaska in 1952. The first drilling location was 50 miles east of Cordova.

Q. About how many exploration wells has ConocoPhillips drilled (operated) in Alaska in between 1999 and present?

A. As the state’s most aggressive explorer, ConocoPhillips has drilled more than 50 exploration wells since 1999, including 15 wells in the National Petroleum Reserve-Alaska.

Acreage position, production

Q. How many net exploration acres does ConocoPhillips have in Alaska?

A. 1.7 million net undeveloped acres in all of Alaska.

Q. ConocoPhillips Alaska production in 2005?

A. 314,000 barrels of oil per day, 169 million cubic feet of gas per day.

Q. What fields/facilities does ConocoPhillips operate in Alaska?

A. ConocoPhillips operates the Kuparuk and Alpine oil fields, as well as the Kenai Liquefied Natural Gas Plant, North Cook Inlet platform and Beluga River unit gas field. ConocoPhillips is Alaska’s largest oil and gas producer, with major ownership in the Prudhoe Bay unit, the Kuparuk River unit and the Colville River unit (Alpine). The company also owns 28 percent of the Trans-Alaska Pipeline System.

Q. Has ConocoPhillips begun working on permit applications for a development at Lookout in NPR-A?

A. We will continue to pursue the outcome of state, local and federal permits for the three remaining Alpine satellite developments in the National Petroleum Reserve-Alaska (Alpine West, Spark and Lookout).

Viscous oil, Arctic technology

Q. Is ConocoPhillips Alaska currently working on (or has it recently developed) any new Arctic technology?

A. ConocoPhillips has successfully tested the use of multilateral wells for heavy oil development at the West Sak oil field. The average West Sak well used to produce less than a few hundred barrels of oil per day; however, using the new tri-lateral wells had an initial production rate of 7,000 barrels per day and achieved stabilized rates of 2,000 barrels of oil per day. This has been the most significant factor in the development of North Slope heavy oil over the past six years. And led to the $500 million development of West Sak Drill Site 1E and Drill Site 1J project.

Colville (Alpine) unit development

Q. ConocoPhillips applied to the U.S. Army Corps of Engineers to expand the CD-2 pad at Alpine in the Colville River unit for development of the Qannik reservoir and to allow for additional storage for Alpine CD projects. Has that application been approved?

A. Permits for this development are currently pending review by regulatory agencies. ConocoPhillips is pursuing permits for the development of Qannik, a satellite development overlying the Alpine oil field. Further delineation and development of the Qannik field is under way, and the plan is to develop Qannik from the Alpine field’s CD2 drill site. Qannik is currently planned as a nine-well development with six producing wells and three water injection wells. First production could occur by late 2008.

Q. When do you expect Nanuq (CD-4) to come online?

A. Before year-end 2006.

Q. In regard to Alpine satellites, ConocoPhillips filed applications in September 2005 for Alpine West, the CD-5 pad development, in NPR-A on Kuukpik Corp. surface land some six miles west/southwest of CD-1. The area includes acreage leased by ConocoPhillips and Anadarko from ASRC, the State of Alaska and the Bureau of Land Management, with ASRC holding the majority of subsurface ownership. Have those applications been approved?

A. There are several unresolved issues about the CD-5 (Alpine West) project right now, including the outstanding permits and potentially increasing project cost. All these issues must be considered when evaluating the economics of the project before moving it forward.