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Vol. 12, No. 4 Week of January 28, 2007
Providing coverage of Alaska and northern Canada's oil and gas industry

Chevron moving forward in inlet, on North Slope

Alan Bailey

Petroleum News

With 40,000 barrels of oil production per day, Chevron is Alaska’s fourth largest crude oil producer, Scott Davis, vice president, mid-continental business unit leader of Chevron North America, told Meet Alaska conference attendees on Jan. 19. But the company has ambitious plans to expand its operations in the Cook Inlet basin and on the North Slope.

“We plan to … increase investment in Alaska not (only) over the next three years but over the next 15 to 20 years,” Davis said.

After purchasing Unocal in 2005, Chevron took “a hard look” at its newly acquired Cook Inlet assets, he said, concluding there was a lot of oil and gas yet to be discovered.

“We are we going to be investing aggressively out there to see that happen.”

Chevron’s total onshore and offshore Cook Inlet basin production is about 25,000 barrels per day of oil equivalent, which includes natural gas, he said.

“We’re planning a multi-year development program” starting later this year that includes new drilling and waterflood expansion, as well as testing some new geologic horizons in the Jurassic, below the level of the current oil fields, Davis said.

Chevron takes the supply of natural gas to Southcentral Alaska very seriously and is “very optimistic” about its ability to supply the local market in years to come,” he said, noting that Chevron’s inlet gas plans include more drilling at Granite Point and more exploration in south Kenai.

“There is quite a bit of development to be done at Beluga River. … There are multiple programs in place to be carried out … to make sure we continue to supply gas.”

Bullish on the North Slope

“We’re very bullish about the future of the North Slope,” Davis said.

He described Chevron’s North Slope holdings as “a mile wide and a mile deep,” with interests in Prudhoe Bay, Kuparuk, the Brooks Range Foothills, and an extensive exploration fairway in the White Hills area, which is south of the Kuparuk field and southwest of Prudhoe Bay.

“It’s about 40 miles long and 20 miles wide,” Davis said. “We’re pretty excited about it. We will be drilling four wells in the winter season of ’07-’08.”

Chevron and partner BP were the original players in the Arctic National Wildlife Refuge, with Chevron operating the only exploration well in the 1002 area. Davis said his company is waiting to see if ANWR is ever re-opened.

What about the eastern North Slope’s Point Thompson unit that abuts ANWR and is thought to contain significant reserves of oil and gas?

“We did have 25 percent of that,” he quipped, adding that the Alaska Department of Natural Resource termination of the unit was a blow to his company. Chevron has filed litigation challenging the decision.

“In our opinion the field is really a gas field and needs to be developed as such,” he said, in reference to controversy about how the field should be developed. He said if it weren’t such a challenging field to develop it would have come on line a long time ago.

Applauds transparent gas line negotiations

Davis said construction of a North Slope pipeline is critical to bringing Point Thompson into play and that Chevron supports the North Slope producers’ proposal for a pipeline to the U.S. Midwest through Canada.

“All of us have to be aligned, not just the big three (producers). … We do applaud the governor’s initiative to be transparent (in gas line negotiations). … We think that’s a good step.”

Fiscal certainty is very important, he said. “We have to know what we’re going to be dealing with when going in.”

Worldwide there is considerable fiscal uncertainty but Davis said Alaska is an especially tough environment, with high operating costs, long permitting times and labor shortages for a huge pipeline project.

And although Chevron sees good and bad aspects to Alaska’s new oil and gas production tax, he said the company applauds the investment incentives that the tax provides.

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