Restart not straightforward
ConocoPhillips resuming North Slope activity hangs on oil price, no rise in taxes
While ConocoPhillips’ goal is to “weather the storm” and get North Slope jobs and production back online, getting back to a normal level of activity in Alaska is dependent on how soon oil demand and prices recover, Scott Jepsen said May 8. It will also depend on the investment climate, he said, “and by that, I mean on whether or not the oil tax initiative passes,” noting it calls for “a significant tax increase” which “will put a brake on future investment.”
According to the Alaska Oil and Gas Association, if the tax initiative on the Nov. 3 ballot passes it will increase the state’s oil tax by 150-300%, depending on the price of oil.
In April, ConocoPhillips got $16.55 per barrel for North Slope crude before transportation costs, and around $8 a barrel after transportation costs. In mid-2018 Jepsen said $40 a barrel was the company’s breakeven price for North Slope operations, an average that encompasses both existing oil fields and greenfield projects, such as the proposed Willow development.
As of market close on May 12, the Alaska Department of Revenue estimated the price of North Slope crude before transportation costs was $26.40.
Jepsen, ConocoPhillips Alaska’s vice president of external affairs and transportation, with some input from Erik Keskula, manager of North Slope integrated operations and engineering for the company, provided the information in testimony to the state House Resources Committee.
Cuts determined by facilitiesConocoPhillips Alaska’s 100,000 barrel per day crude reduction for the month of June will be from the two producing units it operates on the North Slope.
Colville River, which holds the Alpine field, will ramp down to an average of 25,000 bpd from 55,000 to 60,000 bpd and the Kuparuk River unit will ramp down to 35,000 bpd from about 100,000 bpd.
The June ramp down volume is determined by “the minimum production required to run the facilities” in the units, Jepsen said, noting the curtailment amount will be “reviewed on a month to month basis.”
The cuts represent about half of the oil production attributable to ConocoPhillips in Alaska.
Output is “likely to remain at this level until we start to ramp up our operations” on the North Slope, Jepsen said.
In Phase 1 for Anchorage employees“Right now, we’re working on determining when and how we bring back” Anchorage-based staff, he said. Currently, “only a handful of employees are working in the office.” The rest are working remotely from their homes.
In Phase 1, which begins May 18 for the company, no more than 25% of the 600 Anchorage employees will resume work at 700 G Street.
In Phase 2 up to 50% will be asked to work in the office; in Phase 3, 100%.
This phased return to work at the Anchorage headquarters will continue unless there’s another wave of Covid-19 outbreaks in the area, Jepsen said.
From 3,000 workers to 1,100He also spoke of ConocoPhillips’ April 7 announcement that it was demobilizing its North Slope rig fleet, including laying down rigs doing development drilling at Kuparuk and Alpine and early termination of the off-road winter exploration season with only three of seven wells drilled, one at the Harpoon prospect and two Tinmiaq wells near the company’s proposed Willow development.
Three thousand workers - ConocoPhillips employees and contractors combined - were onsite in early February at the peak of the winter exploration season on the North Slope, Jepsen told the committee, with only 1,100 on the Slope today. The bulk of the difference is seasonal workers.
On May 5, ConocoPhillips Alaska spokeswoman Natalie Lowman told Petroleum News that total company “employee numbers today - ~1,100 - have not changed since March.”