New discoveries, more lease sales in the NPR-A and “dark clouds” over state and industry discussed at AOGA forum

Kay Cashman

Announcements of oil and gas discoveries in the National Petroleum Reserve-Alaska, two more NPR-A lease sales and increased spending on the North Slope and in Cook Inlet were all topics of discussion at the annual oil and gas forum in Anchorage on May 21. The luncheon, which drew a crowd of more than 500 people, was sponsored by the Alaska Oil and Gas Association and the Anchorage Chamber of Commerce.

But all the news wasn’t good news. Industry leaders spoke with concern about change — or the possibility of change — in Alaska’s regulatory and fiscal policies.

Mark Hanley, Anadarko Petroleum Corp.’s spokesman in Alaska, reminded the audience that last year Anadarko was the only company looking for gas on the North Slope, particularly in the Brooks Range Foothills.

“This year we have Unocal, Chevron, Alberta Energy, Burlington Resources and newcomer Petro-Canada in the foothills. We’re attracting new companies to Alaska,” he said.

The state’s recent success at its foothills oil and gas lease sale, Hanley said, indicates that “people are betting there is going to be a way to commercialize North Slope gas.”

He stressed that “stability in governmental regulation and fiscal policy” were “very important” in attracting and keeping industry players active in Alaska.

“Anadarko is the largest independent oil and gas company in the world. … It takes longer to permit and develop a prospect in Alaska than anywhere in the world,” Hanley said.

Top of the good news list was the U.S. Bureau of Land Management’s announcement that it will hold two more lease sales in the NPR-A. (See story on page A1.)

Phillips Alaska Inc. President Kevin Meyers announced the first discoveries in the NPR-A. (See story on page A1.)

Despite a late start due to an unusually warm winter, Meyers said Phillips had done more than 1,000 square miles of 3-D seismic on the North Slope this past winter — a record amount.

“We’re very excited” about the exploration opportunities in Alaska, he said.

Meyers credited industry success in Alaska partly to the stable fiscal and regulatory policies of the last decade.

But he warned of a “dark cloud” over the state and industry that did not bode well for the future of either, alluding to proposed fiscal initiatives and permitting policies that signaled a possible “turning point” for Alaska.

“Don’t damage the largest economic engine in the state,” Meyers counseled.

New members for AOGA

Gary Carlson, senior vice president of Forest Oil Corp., said Forest plans to commit $100 million to Cook Inlet exploration this year, 20 percent of its total exploration budget.

Carlson also said the company is testing its second exploration well at Redoubt Shoal in Cook Inlet. If the results come in as expected, he said, Forest plans to modify its Osprey platform for production — possibly as soon as next year.

Carlson praised the state for its exploration licensing program, administered through the Division of Oil and Gas. On the negative side, he said the state “still has problems in permitting” projects and expansions in a timely manner.

Chuck Pierce, vice president Unocal Alaska Inc., told attendees his company is “bullish on gas exploration in Alaska … both in the (Brooks Range) foothills and in Cook Inlet,” adding that Unocal has doubled its capital budget for Alaska this year and expects to produce new gas by 2003.

Pierce said that in order for Unocal to remain focused on “growing its Alaska business” the state needs to remain open for business.

John Barnes, local head of Marathon Oil Co., told attendees that his company is “committed to our gas business in Cook Inlet” and will spend $20 million on it this year.

“What’s the answer to continued prosperity for Alaska as a result of the oil and gas business? I can’t guarantee I know the answer but the key revolves around a stable fiscal and regulatory climate versus imposing unrealistic regulations as California did. We all know what happened there,” he said.

Richard Campbell, president of BP Exploration (Alaska) Inc., provided a humorous interlude when he opened his presentation by introducing his cohort “Twixie” (Paul Laird from BP’s community relations department in disguise) and Twixie’s tackle box.

“We have too much fun at BP to go fishing,” Campbell said as he opened the box.

Among the assortment of items in the tackle box was a bottle of molasses, which Campbell said symbolized BP’s “strides of late in viscous oil technology. We had expected to recover 500 million barrels of oil from Schrader Bluff; now our estimates have reached 1 billion barrels.” The company is committed to a 20 well program at the field, he said.

Throwing out a 12-pack of photos of the Performing Arts Center in downtown Anchorage, he said, “BP is investing $850 million in our Alaska business this year. I understand that is 12 times what it cost to build the PAC. We will spend another $3.5 billion over the next five years.”

BP expects to grow its Alaska oil production by 20 percent this year and sustain that level of production for “nearly a decade,” Campbell said.

Pulling a tinker toy model of a satellite from the tackle box, he said, “We have three new satellite fields coming on line this year. In January our satellite production was less than 5,000 barrels per day. By the end of the year it will have grown to more than 50,000 barrels.”

Drawing a can of baked beans from the tackle box, he said, “Now if this won’t bring our gas to market, I don’t know what will.”

In the closing minutes of the forum AOGA executive director Judy Brady brandished her magic wand in the direction of Sen. Ted Stevens, wishing him success in his efforts to open the coastal plain of the Arctic National Wildlife Refuge to oil and gas exploration and development.