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Future: Safer, smaller, thicker, farther away Kevin Meyers on North Slope in 10-15 years: gas the ‘Big Kahoona’ Kristen Nelson Petroleum News Editor-in-Chief
The work will be safer. Development will be more environmentally friendly. More production will be from smaller fields. And more production will be heavy oil. And gas development — the “Big Kahoona” of remaining North Slope resources — may even be a reality.
That, Kevin Meyers told the Resource Development Council's annual meeting June 13 in Anchorage, is what he sees in his crystal ball when he looks at what the North Slope will be like in 10-15 years. Meyers, president and chief executive officer of ConocoPhillips Alaska, also warned that “predicting the future is always a risky endeavor. But it's especially so in the oil and gas industry.”
Meyers said he thinks “we're going to see continuous improvement in safety.” In 2002, he said, ConocoPhillips Alaska had its best safety year ever: the lost-work-day incident rate dropped by 34 percent; compared to 2000 it dropped by 80 percent. The same, he said, was true for the company's total recordable incident rate.
Meyers said the safety goal is yet to be met: “we're not where we need to be until we're accident free.”
For impact on the environment, Meyers compared footprint: 65 acres of gravel to develop 2,000 acres of field in the 1970s, compared to less than 100 acres of gravel to develop more than 40,000 acres of field at Alpine in 1990. “And I think we're going to keep on improving on that over time,” he said.
Footprints aren't the only thing that's getting smaller, Meyers said: so are remaining fields.
“Looking to the future I think we're going to find that development's going to come more and more from smaller fields,” he said. In 1990, less than 7 percent of North Slope production was from fields producing less than 100,000 barrels per day, while “today, we're looking at about 40 percent of our production coming from fields under 100,000 barrels a day.”
By 2010, Meyers said, present numbers suggest about 60 percent of production on the North Slope will come from fields producing less than 100,000 bpd.
These smaller fields are more of an economic challenge, he said: “It's going to take a combination of good technical innovation, cost reductions and good fiscal policy to ensure that these developments actually become a reality.” More heavy oil production More of the North Slope's production will also come from heavy oil in 10-15 years, Meyers said.
“There's literally billions of barrels of heavy oil in place underneath the existing infrastructure at Kuparuk, at Milne Point, at Prudhoe,” he said.
But there's a challenge: the oil is thick and cold and it lies in unconsolidated formations that produce a lot of sand — and the flow rates are uneconomic.
Meyers said those challenges are being taken on at Schrader Bluff, West Sak, Orion and Polaris as North Slope operators try to find ways to make heavy oil economic. In 1990 only a few thousand barrels a day of heavy oil were produced, he said. Today the total is about 30,000 bpd coming from Orion, Polaris, Milne Point and West Sak at Kuparuk.
“By 2010,” Meyers said, “we could be producing over 150,000 barrels a day of heavy oil on the North Slope.” New technology is needed to make that happen, he said, and a federal tax credit for heavy oil “might help us accelerate” heavy oil production.
Meyers said he also sees more remote operations on the North Slope in the future. “And as we move farther from existing infrastructure, the cost and the technology challenges are going to go up.” Change to oil and gas Of future development possibilities, gas is the “Big Kahoona,” Meyers said.
It would give Alaska an oil and gas industry, not just an oil industry.
The construction and startup of a gas export pipeline from the North Slope will be the energy equivalent of starting up a 600,000-700,000 bpd oil field, he said. The challenge of building the gas pipeline is the cost, and because the project is so large there is also a huge risk, he said. He noted that ConocoPhillips believes federal enabling legislation and federal fiscal legislation are necessary, along with state fiscal legislation.
“At the state level we've made tremendous progress this year,” Meyers said, with the reauthorization of the stranded gas development act, which allows the state and industry to negotiate fiscal certainty and fiscal clarity for a gas pipeline project.
“ConocoPhillips is anxious to get started with those discussions in the state,” Meyers said. Oil future To ensure the state's oil future, Meyers said, the industry needs access to acreage. And not just any acreage: it has to be prospective for oil. And on the North Slope, we're talking Barrow Arch, he said. Sixty-one prospects have been drilled within 40 miles of the Barrow Arch; 34 were discoveries; 26 are commercial.
Fifty-three prospects have been drilled farther than 40 miles south of the Barrow Arch; one was a discovery; it has not been developed.
“Bottom line: geography and geology do matter,” Meyers said.
The industry also needs “reasonable and cost-effective regulations and permitting,” he said, adding that bills passed in this session of the Legislature are “positive,” protecting the environment while streamlining the regulatory and permitting processes.
Meyers said industry also needs a stable fiscal environment, because “exploration and production and development projects must compete on a global basis.”
The governor and Legislature worked hard to prevent new taxes on the oil industry in this session, he said.
“I also want to applaud the governor for what he's done to try to close the fiscal gap. This is a thankless job. And everyone has a criticism of it and it takes tremendous courage and will power to make it happen and I know we only made some small steps here, but thank you governor, for the courage to do that.”
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