With new oil, ConocoPhillips likely to increase Alaska capital spending

ConocoPhillips will likely increase its Alaska capital spending from $1 billion a year to $2 billion a year in the early 2020s as it tackles development of Willow, its new National Petroleum Reserve-Alaska discovery, and other recent finds, state officials said. The company briefed Gov. Bill Walker and other officials July 16. ConocoPhillips also hosted a group of analysts in Anchorage, and to a North Slope visit for briefings on the plans. The company announced July 16 that drilling last winter has allowed it to increase Willow’s expected oil resource to 400 million to 700 million barrels, up from 300 million barrels estimated in early 2017.

In another discovery, Narwhal, on state lands near the Colville River, a resource of 100 million to 350 million barrels are estimated from last winter’s drilling. ConocoPhillips also drilled west of Willow and discovered more oil and is now also interested in an area south of Narwhal, also on state lands, called “Bear.” A big winner in the Narwhal discovery are Alaska Native corporations that will receive royalties. The subsurface belongs to Arctic Slope Regional Corp. but the royalties are subject to Section 7(i) revenue sharing under the 1971 Native claims settlement act. ASRC will share 70 percent of its income with other Native regional and village corporations. Also, Kuukpik Corp., the surface land owner, has negotiated a small royalty override.

 

Furie under new management; resumes Inlet drilling

Under new management Furie Operating has resumed offshore drilling for gas in Cook Inlet, hoping to meet development commitments to the state and to prevent losing acreage, which will happen if the drilling is not done. Energy Capital Partners,  or ECP, which has largely funded Furie’s work to date, has essentially taken over the company, which is troubled financially. Scott Pinsonnault, of the Ankura Consulting Group (a ‘turnaround’ specialist) has been brought in as new COO at Furie, which will continue to operate. ECP has agreed to continue funding the drill program to prevent a default on leases. Furie is owed money by the state under the exploration incentive program but payments are delayed because of a lawsuit brought over a proposed state bonding program for the payments. Furie is meanwhile now producing gas from one well and selling it to Enstar Natural Gas for $6.50 per thousand cubic feet.

 

BlueCrest works on Cosmopolitan gas

BlueCrest Energy is reported to be working on a plan to drill gas production wells from shore into a shallow gas deposit that overlies an oil deposit at the company’s offshore Cosmopolitan project, which is in Cook Inlet three miles off Anchor Point, north of Homer. Drilling near-horizontal production wells has been done into the deeper oil formation, and BlueCrest is now producing oil. But drilling into the shallower gas formation has presented technical difficulties because of the high angle of the well. BlueCrest hopes to resolve those, we hear. Producing through wells drilled from the shore would remove costs of building two offshore gas production platforms and pipelines, speeding development of gas.

If BlueCrest succeeds it could become another supplier of gas in the Inlet, besides Furie, offering competition to Hilcorp Energy, which now controls most gas production in Cook Inlet.

 

Malemute still working on Umiat oil

  Malemute Energy, current owner of federal leases at the small Umiat oil field in the southeast National Petroleum Reserve-Alaska, told Petroleum News it is still working with consultants on ways of producing the technically-challenging reservoir and hopes to have the work done in early 2019. At that time Malemute will either seek investors or try to sell the leases.

Consultant Ryder Scott estimated a 50 percent chance that 99 million barrels of oil might be economic to produce at Umiat with an “upside” potential of 150 million barrels. The oil is shallow and high quality (45 degrees API gravity) but cool and lacking reservoir energy to drive fluids up wells. Previous owners have drilled and conducted production tests but we unable to achieve economical production rates. Umiat is also disadvantaged by its remote location 100 miles west of the Dalton Highway and the Trans Alaska Pipeline System.

 

Eni could flow-test key well in August

Eni told agencies it now plans to do production tests in August from its Nikaitchuq North extended-reach (a long lateral) exploration well it has been drilling from a location on Spy Island, on state lands, into federal Outer Continental Shelf leases to the north. The drilling took longer than planned and Eni has had to delay a second well, a “sidetrack” drilled off the first well, because of seasonal restrictions on drilling in the open-water period. That work will now be done later this year when the ocean surface freezes again. Eni has made no announcement on results of the well.

 

Oil and gas employment dropped again in June

Oil and gas employments dropped another 400 in June, to 9,400, compared with June 2017. Construction jobs were up by 400, however. Recent projects, particularly in the Interior Region, have boosted construction employment after nearly four years of losses.