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BP plans to sharply cut drilling in Prudhoe Bay

  • Author: Alex DeMarban
  • Updated: September 28, 2016
  • Published May 9, 2016

The operator of the largest oil field on the North Slope is planning a big reduction in drilling activity this year because of low oil prices, a step that will lead to less oil production from the largest chunk of Prudhoe Bay.

BP's annual plan of development for the Initial Participating Area -- where production began at the giant Prudhoe Bay field almost four decades ago -- estimates a drop in production of up to 40,000 barrels of oil per day.

But BP Alaska president Janet Weiss said on Monday she thinks the actual decline will be less than 20,000 barrels of oil per day.

Weiss said BP is taking steps to minimize the decline from the proposed reduction in drilling activity by operating as efficiently as possible and lowering costs associated with drilling and other well-work.

The plan of development for the area was submitted March 31 to the state Department of Natural Resources for approval. It offers a window into the impact of the recent decision to idle three of the five rigs that had been operating at Prudhoe Bay, a field BP owns with two other major producers, ExxonMobil and ConocoPhillips.

The decision to idle those rigs was announced in March, not long after Alaska North Slope crude was selling for $27 a barrel amid the worst oil slump in years. The price of that oil has since risen, to $45.01 on Friday, still less than half what it was two years ago.

The plan of development, amended with a May 2 letter from BP, includes a range of production levels, including a slight increase in oil production. The plan covers the yearlong period beginning July 1, the state's fiscal year.

But there will be a decline in production in the IPA because of the drilling reduction, Weiss said on Wednesday.

The annual plan calls for 32 wells to be drilled, compared to 60 the year before.

"There's always going to be a production impact of less wells," said Weiss.

She said BP is working with state DNR officials to tighten the range of the expected decline. BP expects the state to issue a decision on the plan in June.

The Initial Participating Area is the portion of Prudhoe Bay where production began in 1977 in what remains one of the largest fields in the nation. Prudhoe Bay produces more than half of the North Slope's oil.

About 234,000 barrels of oil per day were produced in the Initial Participating Area in 2015.

Prudhoe Bay satellites also added about 50,000 barrels of oil daily. Annual plans of development for those areas must also be approved by the Department of Natural Resources.

BP has been working to reduce production decline at the aging Prudhoe Bay field. Oil production declined 2.8 percent in calendar year 2015 compared to the previous year. The drop was less than the 8.8 percent decline from the year before.

Weiss said North Slope crude prices will need to rise to a "sustainable" level above $50 before more drilling rigs can be returned to work at Prudhoe Bay. She said she doesn't expect the Prudhoe Bay rig count to begin increasing until 2018, as long as prices are favorable.

Getting the drilling rigs geared back up and ready for work can take 12 to 18 months, she said.

The decision to increase the rig count will also require input from ExxonMobil and ConocoPhillips.

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