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Phillips’ Alaska exploration limited by logistics, not money Company has a number of areas it is exploring abroad, but North Slope prospects stack up well Kristen Nelson PNA Editor-in-Chief
While there is a lot of competition internationally for Phillips’ exploration dollars, competition is not slowing the company’s activity on the North Slope — the current constraint is logistics.
Dodd DeCamp, Phillips Petroleum Co.’s vice president of worldwide exploration, told The Alaska Support Industry Alliance “Meet Alaska” conference Jan. 26:
“It is a competitive world out there and that could be the bad news. The good news is even with that sort of opportunity you see in the world you’ve seen the kind of dedication of resources and attention being paid to the exploration programs in Alaska, so you know what they do stack up.”
The Phillips Alaska (formerly ARCO Alaska) exploration program in Alaska has made discoveries of more than a billion barrels on the North Slope within the last five years, he said, crediting the members of Mike Richter’s exploration team as “the true heroes in this business.”
Phillips wants to continue “a very aggressive exploration program” in Alaska “as aggressive as permitting and regulatory issues and equipment and facilities allow,” DeCamp said.
“In other words, we are not held back by our appetite to drill more wells or ability to generate drill sites. We’re really limited more by our ability to actually logistically execute programs up there,” he said. Five wells in NPR-A Phillips is particularly interested in exploration on the North Slope right now partly because of drilling opportunities in the National Petroleum Reserve-Alaska, which have allowed the company to increase its drill site inventory and focus more on the west, DeCamp said.
“We do have the largest acreage position in Alaska — with over half a million acres in the National Petroleum Reserve — 1.2 million acres total net.
“It is, I think, the most premier acreage position in a play of this magnitude and this scope of any of its kind in the world. In other words, we have a very, very spectacular position here. We’re very pleased with it,” he said.
Phillips has 12 to 15 wells planned for this winter season, five in the National Petroleum Reserve-Alaska.
“All I’ll say about that is Phillips was first up in the National Petroleum Reserve last year … we drilled three wells then. We liked it enough that we’re going to go back and drill five wells this year. And you can extrapolate from there.”
Phillips intent, DeCamp said, “is to be as aggressive as we can in Alaska.” Phillips’ other interests The competition for Phillips’ exploration investment is worldwide, from offshore China to the Caspian Sea and on deepwater margins in the Gulf of Mexico, off West Africa and off Brazil.
In China, DeCamp said, “Phillips is the leading explorer” and has recently had an “extraordinary set of discoveries, six or seven wildcats resulted in discoveries… (at the) Peng Lai field in Bohai Bay offshore China. There is a multiple potential at Peng Lai, he said, with discoveries of at least 500 million barrels, 2 million acre blocks, huge structures — but finding costs of 70 cents a barrel. Phillips is shooting the largest multi-component ocean-bottom cable seismic survey in the industry right now in Bohai Bay to provide the company better information in the area, where a lot of shallow gas destroys the ability to image near the surface.
In Kazakhstan in the Caspian Sea Phillips is participating in the Kashagan consortium, which just drilled its first wells 25 miles to the southwest of the appraisal well. This discovery, announced early last year, also encountered oil and gas. DeCamp said the structure looks to be one of the largest discoveries in the world in the last 30 years.
It will “fundamentally change the geo-political nature of Kazakhstan and the Caspian Sea,” DeCamp said.
“And in terms of consuming attention and resources, it’s going to be a world-scale project. Even part of this feature, even a 5- or 6-billion barrel development on one end of this structure would consume all of the port facilities, construction and yard fabrication facilities around the Caspian Sea for the next few years. And we expect oil to be flowing from this project within the next 10 years. But it will be a big sink for people, dollars and resources.
“And it’s only one of several major structures in the area,” he said. Deepwater margins worldwide In the deepwater margins, some 38 billion barrels have been discovered over the last 15 years, DeCamp said, “three-fourths of the oil and two-thirds of the gas … has been found in three places…Gulf of Mexico deepwater, West Africa and offshore Brazil.”
In the Gulf of Mexico Phillips as 110 OCS blocks, has licenses offshore Nigeria and offshore Angola and has opened an office in Brazil, where the offshore just opened in the last couple of years and intends to grow its position in that basin, DeCamp said.
The deepwater margins are hotspots — very expensive hotspots, with drillship costs running $400,000 to $500,000 a day, up to three-quarters of a million dollars a day in heated markets, he said.
Only a very small fraction of these deepwater discoveries are actually on production, most of that in shallow water, 500 to 1,000 meters (1,650 to 3,300 feet). Discoveries are starting to move out into water depths of 1,000 to 1,500 meters (3,300 to 4,950 feet).
The amount of effort will be “truly extraordinary,” DeCamp said, but “rewards are commensurate.”
In terms of competition for a company’s attention and capital resources, he said, “deepwater will continue to be a very, very hot area for the next decade or two and beyond.” Portfolio focus in exploration Phillips has an overall portfolio focus in exploration, DeCamp said. The company has infrastructure programs — programs around existing production — in Alaska, the Lower 48, the Gulf of Mexico, Norway where Phillips discovered the Ekofisk field, the United Kingdom, Nigeria, China and Northern Australia.
“In addition to that we have what I call the three cornerstones of the exploration program — working with successes right now in exploration — Alaska, Kazakhstan, and China.”
In West Africa, Brazil, the Gulf of Mexico and the Northwest Europe-Atlantic margin from west of the United Kingdom to Norway, Phillips is building legacy-scale programs. Those are also, DeCamp said, the hottest areas of exploration in the world for the rest of industry.
And then there are new areas — like Libya and Iran — which will open to U.S. companies when sanctions are lifted.
Given all of these areas, he said, it is a competitive world.
But with the kind of dollars and attention being paid to Alaska, it’s obvious the state measures up, DeCamp said.
“We do globally rank our portfolios, so everything in the portfolio competes with everything else. There is no compartmentalization. A program in Alaska has to be competitive with a program in China or a program in West Africa.”
Worldwide, Phillips is drilling almost 60 wells in 2001, “a billion-barrel exposure” — and the company wants, DeCamp said, to stay below that industry average finding cost of $2 a barrel.
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