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Vol. 27, No.20 Week of May 15, 2022
Providing coverage of Alaska and northern Canada's oil and gas industry

Alaska fits Conoco’s GHG goal; Isaacson praises fiscal regime

Kay Cashman

Petroleum News

In conjunction with ConocoPhillips’ first quarter 2022 company-wide earnings presentation on May 5, ConocoPhillips Alaska reported a net income of $584 million for first quarter, whereas its parent reported company-wide net income of $5.76 billion.

During the quarter, ConocoPhillips Alaska incurred an estimated $702 million in taxes and royalties, which includes $524 million to the state of Alaska and $178 million to the federal government.

In first quarter ConocoPhillips Alaska said it invested capital of $253 million in the state and is on track to invest approximately $1 billion in Alaska for the entire year, which is about the same as its capital spend in 2021.

Houston-based parent ConocoPhillips said May 5 it expects to increase its company-wide capital spend from $7.2 billion to $7.8 billion. About half of the increase will be spent on “extra activity” its Lower 48 operations, with the balance going toward inflationary costs.

ConocoPhillips Chairman and CEO Ryan Lance spoke of the company’s ambition to be “Paris aligned and net zero by 2050 with respect to the emissions produced as a company,” noting that Alaska projects such as Willow fit that goal.

In reference to 2022 capital spending in Alaska, Erec Isaacson, president of ConocoPhillips Alaska, said “this investment in Alaska will bring new projects online and add new barrels of oil to the trans-Alaska pipeline”

The state of Alaska’s “existing fiscal regime continues to generate revenue for Alaska and promotes a stable environment for ongoing investment,” Isaacson added.

Since 2007, ConocoPhillips Alaska has incurred over $40 billion in taxes and royalties to the state of Alaska and the federal government. Of that amount, about $31 billion went directly to the state.

In that same period, ConocoPhillips Alaska’s earnings were approximately $23 billion.

Not a ‘cliff transition’

In the Houston-based parent’s May 5 company-wide presentation, Lance spoke of the energy transition, saying he doesn’t think it’s going to be “a cliff transition. It’s going to be a drawn out one and the pace of that - the slope of that curve - is pretty unknown. So the way you react to that is have the lowest cost of supply barrels that you can supply whatever that transition demand is going to look like and make sure that they’re giving an adequate and competitive return. And I think we’re well set up to go do that.”

Lance said ConocoPhillips monitors four or five different “scenarios internally to the company, most of those suggest that there’s going to be a need for oil and gas long past 2050.”

But ConocoPhillips has to “supply that sustainably. We have to supply that with a low GHG intensity going to net zero by 2050,” he said, “but we also have to supply low cost of barrels.”

So, oil and gas is “going to be around a long time,” with “medium- and longer-cycle projects,” Lance said, “going to be needed in this industry. We just have to assure ourselves that they’re competitive on a cost of supply basis and then they have a competitive GHG intensity as well.”

“Projects like Willow and Alaska fit that mode. They’re well under a $40 cost of supply. They are less than $10 a kilogram per barrel of CO2 intensity. So they fit well within what the world is going to need in order to ratably and reliably supply energy to a growing world where energy demand is going to be increasing over time,” Lance said.

“We have to figure out how to do that more sustainably,” he said.

Technology has been at the heart of ConocoPhillips Alaska’s greening of its oil fields on the North Slope.

“The implementation of technology, such as coiled tubing and extended reach drilling, allows for development to avoid or minimize impacts to the environment. We are always seeking new and better ways to responsibly deliver Alaska’s energy potential,” Isaacson wrote in a recent editorial.

Editor’s note: ConocoPhillips has six operating segments, which are primarily defined by geographic region: Alaska; Lower 48; Canada; Europe, Middle East and North Africa; Asia Pacific; and Other International. Approximately 30% of its portfolio is natural gas.

- KAY CASHMAN



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