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AOGA members look to the future BP says single operator at Prudhoe will make more projects economic; ExxonMobil looks at gas cycling at Point Thomson; Phillips Alaska pleased with results at NPR-A, will be back next year Kristen Nelson PNA News Editor
Incredible, momentous and fascinating were some of the terms used to describe the last year in presentations at the annual Alaska Oil and Gas Association-Anchorage Chamber of Commerce luncheon May 22.
Richard Campbell, president of BP Exploration (Alaska) Inc. called the year an incredible one. “Even more incredible, I think, is the fact that most people seem to be smiling about the way it turned out,” including the Federal Trade Commission, the state, Phillips and BP Amoco, he said about the BP Amoco acquisition of ARCO and the sale of ARCO Alaska to Phillips Petroleum Co.
“You know, if it were Hollywood,” he said, “this might be the feel-good movie of the year. You know — the kind with an ending so improbable no one could or world believe it.”
Campbell said BP Amoco is happy about the outcome because, while the company “didn’t achieve all that it had envisioned in Alaska, we did, however, get everything we need to ensure a long and successful future for our company and for our industry on the North Slope.”
Single operator at Prudhoe Bay On July 1, BP will become the single operator at Prudhoe Bay, replacing a dual operator arrangement that has existed since the field was developed. BP will be operating close to 800,000 barrels of oil per day on behalf of itself and its partners, Campbell said.
The single operatorship will mean big savings for Prudhoe Bay — an estimated $100 million a year for the field owners, he said.
“As a result, projects that aren’t competitive today will be competitive tomorrow. And by aligning the ownership of all the oil, all of the satellite fields and all of the gas, we’ve created a commercial environment in which projects can move forward quickly.”
Under the agreement aligning Prudhoe Bay interests, he said, BP’s share of proven Prudhoe Bay oil reserves will decrease by some 390 million barrels.
On the gas side of the ledger, however, BP’s share grows from 6 trillion cubic feet to 9 trillion cubic feet, some 30 percent of the established resource. And BP’s new gas business unit is “pursuing all options for moving gas. We’re part of the industry sponsor group that’s trying to develop a competitive LNG export project. We’re completing engineering on a gas-to-liquids pilot project. And we’re aggressively exploring possible options for the delivery of gas via pipeline to the Lower 48. And let’s not forget, the U.S. market, U.S. gas market, is the biggest and one of the fastest growing gas markets in the world.”
Jim Branch, Alaska production manager for Exxon Mobil Corp., said the last year was a momentous one for ExxonMobil, with the Exxon-Mobil merger completed in December.
In Alaska, he said, “ExxonMobil will remain focused on the same key opportunities that we’ve been advancing with the other producers” including opportunities in the mature fields as well as satellites around Prudhoe Bay.
At Point Thomson, where ExxonMobil is the operator, the company “will be working with its major partners BP, Phillips and Chevron to define a development option that we believe is commercially viable,” Branch said. With Badami in place, Point Thomson — 60 miles east of Prudhoe Bay — is now only 20 miles from existing infrastructure.
Focus at Point Thomson is now on gas cycling, Branch said. Wells would be drilled and the gas produced to the surface to facilities which would separate the liquid condensate which would be sent by pipeline to pump station one. The gas would be reinjected into the reservoir, “preserving the opportunity to sell gas at a later date.”
Challenge of high pressure Gas cycling is used around the world, Branch said, “but it’s a challenge to implement at Point Thomson.” The reservoir at Point Thomson has twice the original pressure of Prudhoe Bay and is much deeper, leading “to high drilling and facility costs that are difficult to overcome.” Gas would need to be compressed to about 11,000 pounds at Point Thomson for reinjection. “That would set a world record and involves many technical hurdles,” Branch said.
Advances in drilling and reservoir simulation will be very important as applied to Point Thomson, Branch said, and the industry has also been making progress in high-pressure injection, with some projects considering 9,000 and 10,000 pound injection.
On a parallel track, the Point Thomson partners are in their third year of gathering data necessary to begin the permitting process, “if we’re able to confirm that gas cycling is economically viable.” Branch said gravel surveys have been conducted in the area to identify a mine site to support well, facility pad, dock, in-field roads and airstrip construction.
“I’m not here today to declare that Point Thomson is commercial,” he said, “but we’re certainly continuing our efforts that we’ve begun in this very important and time consuming pre-permitting process.”
The more things change… “We’ve really reached one of those interesting points in the Alaskan oil history, haven’t we?” asked Kevin Meyers, president of Phillips Alaska Inc. Meyers said “it’s been a fascinating year and I think it’s going to be a fascinating year to come.”
We have a new company but a number of people will do the same things for Phillips Alaska that they did for ARCO Alaska, Meyers said: Ryan Lance will continue to manage western North Slope activities; Joe Leone will manage Kuparuk and Cook Inlet; Mike Richter will head up exploration and land activities; Dave Marquez will continue as vice president of legal and chief counsel; Bob McManus will continue as vice president of tax and external affairs.
Meg Yaege, who runs the company’s pipeline operations, will also have the oversight for Phillips’ Prudhoe Bay interests at Phillips Alaska and Steve Butterworth, ARCO Alaska’s controller, will become vice president of finance, planning and control.
ARCO Marine, now called Polar Tanker, will begin moving oil in the first of its new millennium-class tankers later this year.
Alaska’s largest producer Meyers noted that the acquisition of ARCO Alaska “has totally remade the face of Phillips,” increasing the company’s worldwide production by 70 percent and doubling the company’s reserves. In Alaska, Phillips’ share of oil will be about 365,000 barrels a day, with 2.2 billion barrels of oil equivalent reserves and about 7 trillion cubic feet of natural gas.
Phillips Alaska and its partner Anadarko Petroleum completed three wells and a sidetrack in the National Petroleum Reserve-Alaska this year. The companies are not ready to make an announcement about drilling results, Meyers said. “I’ll just tell you this: we’ll be back there next year because we were encouraged.”
Phillips also participated in five other exploration wells across the North Slope, and announced with partner BP the Meltwater discovery. If regulatory approvals come in “and things move well, we hope we can bring Meltwater on in about the next 18 to 24 months.”
Referring to the recent history of ARCO Alaska, Meyers said:
“This year, and I never thought I’d have the opportunity to say this — we will deliver on the promise of ‘no decline after ‘99.’ It is going to happen. It’s something we’re very proud of. And I probably won’t say it again, because now we’ve got to figure what we’re going to move on to.”
The future, he said, is maintaining that commitment — but, he said, that will require a stable regulatory environment, solving the state’s fiscal problems, facing judicial challenges and diversifying Alaska’s economy.
“And ARCO” Mark Hanley, head of public affairs in Alaska for Anadarko Petroleum Corp. and the incoming president of the Alaska Oil and Gas Association, said he was pleased that the ARCO sale was settled.
“For us at Anadarko,” he said, “there’s been a lot of confusion about the name. When I first started people said, ‘And ARCO’ — what part of ARCO is that?” When ARCO Alaska became Phillips Alaska, Hanley said, he figured that problem was solved, until someone said to him just the other day, “I thought Phillips bought everything ARCO had in Alaska. What part of you was left?”
Anadarko, he said, is one of the world’s largest independents and is about to double in size through a merger with Union Pacific Resources, the resources arm of the old Union Pacific Railroad. Union Pacific, he said, has assets throughout the Lower 48, Central and South America, and Canada.
“In Alaska, while there’s no duplication up here, we are going to be a lot bigger and it will allow us to take advantage, I think, of more opportunities that are up here. We’re going to be much stronger financially.”
Partners with Phillips Anadarko is partners with Phillips in the Alpine field, in NPR-A acres and in Cook Inlet, where the company hopes “to drill a few wells on the west side of Cook Inlet this summer or fall and bring some gas into the market here in this region.”
In addition to its partnerships with Phillips, Anadarko also has its own acreage, Hanley said, and is partners with Arctic Slope Regional Corp. and has exploration rights to ASRC lands.
Anadarko sees a lot of potential in Alaska, “but you have to remain competitive up here,” he said. While Anadarko isn’t involved in the Caspian oil discovery reported recently, he said, other Alaska oil companies are (BP Amoco, ExxonMobil and Phillips Petroleum are among partners in the Caspian find) and it’s a reminder of the competition for capital with worldwide projects.
In addition to that competition, the state is a high-cost environment because of weather, Hanley said: Alaska has potential but positive results in the future will depend on keeping the state a positive place to do business.
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