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Bad news: North Slope spending down. Good news: Third rotary drill rig going to Prudhoe Bay
Larry Persily Petroleum News Juneau correspondent
Although the three major North Slope producers are working toward reducing operating costs, they still spend far in excess of $1.5 billion a year on goods and services purchased from Alaska businesses.
ConocoPhillips, which operates the Kuparuk River unit, spent more than $600 million with Alaska businesses in 2002. BP, which operates the older and much larger Prudhoe Bay unit, reported more than $900 million spent on goods and services purchased from in-state vendors in 2002.
ExxonMobil does not break down its operating and capital spending between in-state and out-of-state businesses. (Although not an operator of a producing field, ExxonMobil contributes its share of unit costs.)
ConocoPhillips and BP both report that about 85 percent of their third-party spending for Alaska operations goes to in-state businesses. The numbers include operating, maintenance and capital spending. Spending on downward trend Both companies reported a drop in total contractor and supplier spending from 2001 to 2002, with the decline expected to continue when 2003 spending is totaled after the end of the year.
BP’s spending on goods and services in 2000 totaled $720 million, with 83 percent of the money paid to Alaska businesses, according to the company’s annual Alaska Hire and Purchasing report issued recently. Total spending jumped more than 60 percent to almost $1.2 billion in 2001 as BP completed construction on its Northstar oil field, adding an average of 60,000 barrels per day to North Slope production.
The company reported its spending with in-state businesses increased to 86 percent of BP’s goods and services total in 2001.
BP’s total third-party spending slipped to $1.08 billion in 2002, with the in-state purchases holding at around 86 percent, or more than $900 million.
“In 2002, BP had no significant new development projects under way,” the company’s report stated. Since completing Northstar, “the company has concentrated on smaller-scale projects aimed at adding new reserves to existing fields.”
The company’s 2003 spending likely will total just under $1 billion as BP continues to look for cost savings, said spokesman Daren Beaudo.
About 80 percent of BP’s spending is on services, including drilling, catering, security, engineering and construction. The rest of the money goes toward supplies and equipment. BP to add third drill rig at Prudhoe Bay Beaudo said the company plans to put a third conventional rotary rig into service at Prudhoe Bay in November. There are currently two conventional rigs at Prudhoe doing in-field drilling as BP continues to look toward adding production from existing fields.
The new rig’s work could also include in-field drilling, Beaudo said.
The addition of a third rig will bring Prudhoe Bay’s conventional rig count back up to 2001’s three to four rig level. (In 2002 and 2003 to date only two conventional drilling rigs have been working at Prudhoe Bay.)
ConocoPhillips spent $756 million on goods and services with Alaska companies in 2001, about 85 percent of its total North Slope vendor spending, said company spokeswoman Dawn Patience. The company in 2001 was completing work to bring its new field at Alpine to full production. Alpine production averaged 40,000 barrels per day in its first partial year, and then climbed to almost 100,000 barrels a day by 2002.
ConocoPhillips’ in-state purchases dropped to $618 million in 2002 and likely will total somewhat more than $500 million in 2003, Patience said.
Included in ConocoPhillips’ North Slope spending the past several years has been its exploratory drilling in the National Petroleum Reserve-Alaska, where the company has been working its leases since 2000. Conoco’s 2004 spending decisions pending The company will announce its 2004 capital budget in late December, after the board of directors takes action on spending requests, she said.
ConocoPhillips’ spending totals do not include the company’s $1 billion investment in five double-hull oil tankers for its Alaska trade, the first of which was delivered in 2001 and the last scheduled to start work in late 2005.
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