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Shutdowns impact output
COVID, price drop, caused drilling stop; wells contribute for up to a decade
Kristen Nelson Petroleum News
What was the impact of last year’s COVID-19 and oil price related shutdowns on North Slope production? It was a question the Alaska Department of Natural Resources addressed in a presentation to the Senate Finances Committee on Jan. 27.
BP Exploration (Alaska) and ConocoPhillips Alaska demobilized their drilling fleets on the North Slope last April in response to COVID-19, ending both development and exploration drilling.
This rig laydown in fiscal years 2020-21 is expected to impact North Slope production in both the short and long term, said Maduabuchi Pascal Umekwe, a reservoir engineer with DNR’s Division of Oil and Gas.
In addition to the fleet demobilization in response to the pandemic, Alyeska Pipeline Service Co. had prorations - limitations in what oil it would take - due to storage issues on the West Coast, the destination of most North Slope crude, because of a dramatic drop in demand caused by price drops and the pandemic. ConocoPhillips also cut production on the North Slope.
April was the worst month overall, Umekwe said, with an oil price drop of about 25% over a two-week period and a drop in demand of millions of barrels of oil per day, the equivalent, he said, of the entire U.S. production evaporating from global demand.
Describing 2020 as a year of unprecedented volatility in oil prices and oil markets, DNR Commissioner Corri Feige said the curtailment of drilling and the rig laydown saw the North Slope go from full production, infill and exploration drilling to barebones over the course of roughly 10 days.
In July ConocoPhillips ended production curtailment at the Kuparuk River and Colville River units and in November announced plans to restart North Slope drilling in December, Umekwe told the committee.
Pandemic impacts Umekwe said each year of production drilling on the North Slope contributes to long-term rates, with production from new wells helping mitigate overall production decline. In some years, he said, past years of drilling contribute an average of 3% to 8% of annual North Slope production over almost a decade.
Because rigs were laid down in FY20-21, there are undrilled wells, what Umekwe called “missing wells” that would mitigate decline for periods beyond the year in which the wells are drilled. He also said that “compensatory” production enhancement activities could mitigate the “lost development drilling” impact in the short term.
Production decline Over the past five fiscal years production decline has been modest, some 1%, Umekwe said, illustrating with production from fiscal years 2016 through 2020 averaging 516,378 barrels per day in FY16, 527,918 bpd in FY17, 520,036 bpd in FY18, 506,080 bpd in FY19 and 483,477 bpd in FY20.
Recent major changes include:
*Hilcorp talking over as Prudhoe operator, with what Umekwe described on slides accompanying the presentation as “strong ongoing production optimization efforts.”
*Natural decline at Kuparuk with “pandemic related production disruption/interrupted rig activity.”
*Natural decline at Colville River with “pandemic related production disruption/interrupted rig activity.”
*Production growth at Milne Point of some 28% from FY19 to FY20 with drilling at the M, L and I pads.
*Improved facility reliability at Point Thomson.
Near future projects include Fiord West, Greater Mooses Tooth 2, Raven Pad at Milne Point and CD5 expansion.
And farther out are Pikka, with front-end engineering and design in 2021 and Willow, with FEED and a final investment decision expected by year end 2021.
Update on status of future projects Umekwe compared the status of upcoming projects in January 2020 and January 2021.
*Moose pad at Milne Point had a production rate of some 5,000 bpd last January and a rate of 9,700 bpd in January 2021; a peak rate of 22,000 bpd is projected.
*CD5 second expansion had a status of ongoing drilling in January 2020 and a January 2021 status of ongoing drilling by year end 2020 after COVID-related interruption. Production is expected to reach more than 10,000 bpd.
*Pikka: In January 2020 it was planned for two phases, with phase 1 projected to start production in 2022 and phase 2 in 2024, with a move to FEED after 15% divestment of interests. The January 2021 status is phase 1 production starting in 2025; a move to FEED in 2021; FID and 15% Alaska divestment in year end 2021 through 2022; peak design capacity rate for phase 1 is 80,000 bpd.
*Willow: In January 2020 a supplemental EIS was expected, with a record of decision in the fourth quarter and first oil in 2025-26. The January 2021 status is record of decision achieved; FEED; FID expected year end 2021; announced first oil 2025-26, with a peak rate of 130,000 bpd.
*Liberty: Received its final EIS followed by a record of decision, both in 2018, with a start up projected for 2022, pending litigation; in January 2021, a 9th Circuit Court decision had placed the project on hold pending an operator appeal to the Supreme Court; peak rate expected at 60,000 to 70,000 bpd.
Production forecast In the first five months of FY21, July 2020 to November 2020, on average daily production has been within the range forecast by DNR. FY21 production is forecast to average 470,000 bpd with a range of 413,000 to 526,000 bpd.
Without new projects, decline at existing field would exceed 4% to 5%, the historical North Slope decline rate.
Slides from the presentation noted that scope and estimated ultimate volumes of new projects compare closely with historical Prudhoe Bay and Kuparuk River satellites, and with some standalone developments such as Alpine.
Summarizing production impacts, there is uncertainty in operator plans in certain projects in the 10-year outlook period - when drilling activity will return, specific project uncertainties, depressed oil prices, commercial risks, and project scope and timing risks.
DNR “forecasts assume steady-state development on currently producing fields, similar to past history for all the fields.”
The discussion of new projects notes that outcoming and timing is “critical in maintaining North Slope historical 4% to 5% historical decline or the possibility of flattening or growth in production.”
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