|
Johansen: Urgency lacking on throughput Drop in North Slope oil production a key challenge, ConocoPhillips Alaska chief tells Anchorage Chamber; costs a lot to maintain Kristen Nelson Petroleum News
Trond-Erik Johansen, president of ConocoPhillips Alaska, told the Anchorage Chamber of Commerce Oct. 10 that there is a lack of urgency in the state about the need to increase production through the trans-Alaska oil pipeline.
Alaska’s crude oil production is down 36 percent since 2003, he said, while Texas production has held about level over that time and Gulf of Mexico production is up 9 percent.
ConocoPhillips is the state’s largest oil producer, averaging more than 230,000 barrels per day.
The company has been in Alaska for 50 years and plans to be here for another 50, he said, but there are challenges.
Alaska development, he said, competes with projects elsewhere.
There is viscous oil in the West Sak formation that can be developed, and heavy oil in the Ugnu formation that requires a lot of technical effort.
At Kuparuk, Prudhoe and Alpine, the North Slope’s big conventional oil fields, the easy oil has been found, Johansen said. While those fields are very mature, there is a lot of oil left, but producing it requires going into new horizons and smaller pockets, and it will take longer to produce it. The number of production drilling rigs is the same as five years ago, he said, but less and less oil is produced from each well drilled.
And today’s spend, Johansen said, is 70 percent maintenance capital and 30 percent development capital: 10 years ago those numbers were reversed.
Urgency needed He said there needs to be some urgency around getting more oil in the pipeline.
The trans-Alaska oil pipeline is moving 600,000 barrels per day and throughput continues to decline. As you drop through 500,000 bpd and 300,000 bpd, major money must be spent to keep those reduced volumes flowing, Johansen said.
There is hope for discoveries in the Chukchi Sea, where ConocoPhillips hopes to drill at Devil’s Paw in 2013 or 2014, but it will take at least 10 years to get that oil in the pipeline, he said.
Challenges include geology and geography, which makes wells here much more expensive than elsewhere.
But a big part of the challenge is the investment environment, he said.
While we can’t do anything with geology or geography, can we do something with the fiscal environment, Johansen asked.
“I can’t,” he said.
One million bpd were moving through the pipeline in 2003 — can we get back to that level?
Johansen said it would take a breakthrough in the outer continental shelf and investment, but the risk is high.
With the progressivity element in Alaska’s production tax, there is less and less profit to companies taking the development risk, he said.
More opportunities Johansen reminded the audience that when ConocoPhillips’ CEO Jim Mulva was in Anchorage earlier in the year he said that passing Gov. Sean Parnell’s production tax change, House Bill 110, would put Alaska on the competitive map.
In response to questions, Johansen said ConocoPhillips would commit to more investment if there was a tax change. He said he couldn’t give exact numbers, but those numbers would be large. He noted that Mulva said indicated an additional spend of $5 billion over the next three to five years if HB110 passed.
“We like what we see in Alaska,” Johansen said, but added that it’s hard to funnel funds here with the high marginal tax rate. Asked if ConocoPhillips would commit natural gas to an in-state bullet line, Johansen said ConocoPhillips would like to monetize North Slope gas and is looking at alternative ways to do that, and talking with the state and other companies.
| 