ConocoPhillips expects its oil production in Alaska to be flat over the near term, as increased development drilling and a slate of projects currently in development will offset "unmitigated" field declines to keep production levels "roughly flat" through 2017.
If so, the next few years would be a rarity in a basin where oil production has been consistently declining for nearly three decades -- save a brief uptick when ConocoPhillips brought the Alpine field into production nearly 15 years ago.
Perhaps more interesting, ConocoPhillips appears to be considering a range of North Slope development projects that, presumably, could offset declines in the mid-term.
That said, Alaska remains a maturing basin. Analysts wanted to know how Alaska compared to unconventional opportunities in the Lower 48, such as the Eagle Ford shale of south Texas and the Bakken formation of North Dakota, where ConocoPhillips and its subsidiaries are leading players. The growth of those basins has greatly increased ConocoPhillips' oil production in the Lower 48, after years of focusing on natural gas.
"Some people have asked us, with all the great opportunities that you have in the Lower 48 unconventional, why are you growing your capital in Alaska," ConocoPhillips' Executive Vice President Al Hirshberg said during an annual meeting for investors and analysts on April 8. "We are the biggest producer in Alaska, and with the improved fiscal terms that we've gotten there now, it does support increased investment for us on our projects there and in our development drilling around our current infrastructure."
Alaska offers "legacy cash flows from all the investments we've made in the past few years," Hirschberg said, and is "in a bit of a resurgence" with a slew of new projects.
Later this year, ConocoPhillips expects to bring two major projects into production. The DS-2S project would be the first new drill site at the Kuparuk River unit in more than a decade. The CD-5 project would be the newest satellite of the Alpine field. The company is also working to bring the 1H NEWS project at Kuparuk into production by early 2017.
Near-term work
Additionally, the GMT-1 development at the Greater Mooses Tooth unit in the National Petroleum Reserve-Alaska is "progressing toward sanctioning," even though the company delayed a sanctioning decision earlier this year, citing permitting uncertainties.
The company is also conducting very early engineering and design work for the Alaska LNG Project to bring North Slope natural gas to markets Outside. That is a much more complex project and much less certain to move forward than other Alaska efforts.
The project remains "on the edge," according to Chairman and CEO Ryan Lance.
"Now the advantage of the Alaska North Slope is it's a resource that is known. We are injecting 8 bcf (billions of cubic feet) a day around the horn for pressure maintenance at Prudhoe Bay and there's a lot of gas resources," he said. "The risk in that project is the execution on the technical side. It is building a pipeline, building a plant and building the infrastructure."
Mid-term
Those projects have all been discussed regularly in recent years.
In a chart shown to analysts, ConocoPhillips outlined other "conventional" opportunities across its global portfolio, including 10 projects across its North Slope holdings.
The CD-5, DS-2S and 1H NEWS projects are all grouped in the "execution" phase, along with current development projects in China and the North Sea. The GMT-1 project is in the "optimize" phase, along with another phase of the China project -- Bohai Bay.
ConocoPhillips appears to be considering many other Alaska projects, though.
A long-discussed development in the west end of the Prudhoe Bay unit, in which ConocoPhillips is an important working interest owner, is in the "concept select" phase.
The nine global projects listed as being in the "appraise" stage include four Alaska projects: GMT-2 at the Greater Mooses Tooth unit, the nearby Bear Tooth unit, the Fiord West satellite of Alpine and 1N and 1P NEWS developments at the Kuparuk River unit.
This story originally appeared in Petroleum News. It has been republished with permission.