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Anadarko in Alaska: The good, the bad, the unknown Company lays off two, working on plans for upcoming winter drilling season Kay Cashman Petroleum News Publisher & Managing Editor
The bad news for Alaska in Anadarko Petroleum’s recent cost-cutting announcement is that the company’s Alaska office will lose two of its 10 employees. Plus, two other staff members will be transferred to the company’s Alaska group in its Houston headquarters. (See related page 1 story.)
“Our office is being slimmed down like everyone else’s as we try to get our costs down,” Anadarko spokesman Mark Hanley told Petroleum News Aug. 1. “The good news is Anadarko’s focus on Alaska has not changed.”
And neither has its budget, if company CEO Robert Allison is to be believed.
Allison told analysts on a second quarter earnings conference call July 31 that Anadarko would maintain its 2003 capital expenditure budget of $2.7 billion.
Sixty-three million of that was initially earmarked for exploration and development work in Alaska.
The specifics of how that money will be spent, however, are unknown. Winter wells a question mark In the fall of 2002, after canceling tentative drilling plans for a conventional oil exploration well on the North Slope, Anadarko said it would probably drill as many as three conventional exploration wells on the North Slope in the 2003-2004 winter drilling season. The most likely drilling targets, state agency paperwork indicated, were Arctic Char and Dolly Varden, both prospects in the gas-prone Brooks Range Foothills where the company has a huge acreage position.
In January, when Anadarko announced it would spend $63 million on capital and exploration projects in Alaska in 2003, the company said its plans included testing two North Slope prospects this year, including a possible satellite near the Alpine field and another well in the National Petroleum Reserve-Alaska. It did not specify whether any of this work would be Anadarko-operated or in partnership with ConocoPhillips, its partner in both NPR-A leases and the Colville unit, but not in the Brooks Range Foothills. A portion of the budget was also tagged to pay Anadarko's share of 16 development wells at the ConocoPhillips-operated Alpine field, part of the Colville unit, Anadarko said at the time.
Anadarko did go ahead and drill a shallow gas hydrate well on the North Slope earlier this year, testing a prototype of its new Arctic drilling platform — an exercise company officials later said cost more than expected.
Hanley said July 29 that Anadarko intends to complete the hydrate well early this winter, but has not yet decided to drill any conventional exploration wells on the North Slope this coming winter.
“There’s a lot of reorganization going on right now, so the capital budget in Alaska … how it will be spent, is not yet certain,” he said.
When asked if the exploration incentives passed by the Alaska Legislature this past year would influence Anadarko’s decision to drill, or not to drill, exploration wells this coming winter, Hanley said the bill was passed and signed after his company and others were already planning drilling for the following year and therefore would likely have less positive impact on the upcoming drilling as compared to the following winter season’s well plans.
He also pointed out Anadarko’s most recent acquisition in Alaska of exploration acreage south of Prudhoe Bay from BP. “Alaska is very much still in our scope.” Anadarko needs expanded production In an Aug. 5 interview, Mark Myers, director of the Alaska Division of Oil and Gas, said he had not seen any indication of a change in direction for Anadarko in Alaska.
Following Allison’s July 31 promise to better focus the company on finding oil and gas and ramp up production, he said believes the company will be even more determined to increase its oil and natural gas production.
“They’re going to have to have some expanded production from somewhere. They are going to have to drill some wells, initiate some exploration activity, to get that production,” Myers said. What about gas exploration? The suggestion last fall that Anadarko might drill three exploration wells in the 2003-2004 winter drilling season came after Anadarko, in partnership with EnCana, another major Foothills leaseholder, placed the winning bid in a state sale of North Slope royalty gas.
Part of the challenge for Anadarko in Alaska, Myers said, is the “chicken or egg battle” in the gas-prone Brooks Range Foothills. “Anadarko has said it needs to know it will have access to the proposed gas pipeline from the North Slope” before the company is comfortable drilling a lot of wells in the Foothills.
As part of their royalty gas bid, Anadarko and EnCana pledged to spend a minimum of $50 million in gas exploration on the North Slope. The contract, if approved by the state’s royalty board and Legislature, would give the companies the access they need to the gas pipeline for as-yet-unidentified volumes of natural gas the two expect to discover in the Foothills.
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