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Hilcorp delivers new rig to North Slope Moose Pad expansion

  • Author: Alex DeMarban
  • Updated: October 13, 2016
  • Published October 13, 2016

Hilcorp Alaska has delivered a newly built drilling rig to the North Slope to support a proposed development known as Moose Pad that could produce at least 10,000 barrels of oil daily, a company executive said on Thursday.

The module rig, named Innovation, will support plans to drill 24 horizontal wells as part of the expansion at the Milne Point unit, said David Wilkins, senior vice president of Hilcorp Alaska.

"It is sitting at Milne," Wilkins said of the rig, after its delivery in September.

The privately owned company, headquartered in Houston, recently began unveiling plans for the new pad that would extend Milne Point to the northwest, filing permit applications with state and federal agencies. The applications did not provide details of additional oil that might be produced and the company is generally tight-lipped.

Wilkins, speaking during an Alaska Support Industry Alliance breakfast, said peak production could range from 10,000 to 15,000 barrels daily. Pad development is expected to begin next year following the construction of ice roads in winter.

The company has said drilling at the project, located on state-owned land, would start in September 2018.

"We see this development on a fast track, being a two-to-three-year process," Wilkins said.

The pace of the project will be dictated by income estimates, a calculation that includes oil prices, taxes and additional costs, he said.

The development is not "lucrative" but will have positive benefits for Hilcorp and BP, which share ownership at Milne Point, and for the state, he said.

The rig, with a rated drilling depth of three miles, can travel 32 miles in six hours. It can also be used at other fields on the North Slope, such as North Star and Endicott, that are owned by Hilcorp Alaska.

The unit was built by Thompson Metal Fab, a fabrication company in Vancouver, Washington, said Lori Nelson, external affairs manager at Hilcorp Alaska. She said she did not have information about the cost of the rig.

Hilcorp arrived in Alaska five years ago when it acquired oil and gas properties in aging Cook Inlet, and later expanded into the North Slope.

The state's oil-well safety regulator, the Alaska Oil and Gas Conservation Commission, has hammered the company over a long list of violations dating back to 2012. One incident in 2015 almost resulted in the suffocation deaths of three North Slope workers, the agency has said.

Hilcorp has boosted natural gas production in Cook Inlet in part by reworking old wells, playing a key role in pushing off concerns of a gas supply shortage in Southcentral Alaska.

With the gas market stabilized for now, the company does not plan to increase gas production again until it is needed, Wilkins said.

Still, the company is pushing ahead with work in the region to prepare for future gas production, including taking steps to build a new gas-drilling pad near Ninilchik.

The company's spending in Alaska peaked in 2014 at close to $450 million. Hilcorp plans to spend a bit more than $200 million in 2016.

Hilcorp is poised to increase well-drilling activity this year and next year, above 2015 levels, Wilkins said.

The company has not laid off employees, he said.

BP, ConocoPhillips and other oil and gas companies in Alaska have cut staff to help survive a long-term slump in oil prices.