C-P signs five-year deal with Doyon Drilling for new rig

ConocoPhillips has awarded a five-year, $100 million contract for a new rotary drill rig to Doyon Drilling, a subsidiary of Fairbanks-based Alaska Native regional corporation Doyon Ltd.

Doyon Drilling now operates seven rigs and the new rig is scheduled to go into service in 2016. Six of Doyon’s rigs are now working in North Slope fields while the seventh is working in Cook Inlet.

The new Doyon 142 is scheduled to begin work in February 2016, Doyon and ConocoPhillips officials said July 28.

“The addition of Rig 142 to Doyon’s fleet is a testament to ConocoPhillips’ commitment to Alaska. The contract for the rig is long-term and is one example of how Senate Bill 21 (MAPA, or the More Alaska Production Act) is making a positive impact on Alaska’s economy,” said Doyon president and CEO Aaron Schutt. “This opportunity is good for Doyon, its shareholders and Alaska.”

Doyon Drilling has 440 employees, which will increase by at least 100 when the new rig 142 is added. About 50 percent of Doyon Drilling employees are shareholders.

ConocoPhillips Alaska President Trond-Erik Johansen said, “Contracting for a new rig is another step we are taking to increase production on the North Slope.

“SB 21 has improved the business climate in Alaska, and we are investing in projects that add production, increase state revenues, increase contributions to the Permanent Fund and create jobs and business opportunities for Alaskans.”

Since SB 21 was approved by the Legislature in April 2013, ConocoPhillips has laid on two additional drill rigs prior to the commitment to construct Doyon 142.

One of the rigs employed earlier, Nabors Drilling rig 7ES, has resulted in the addition of 4,400 barrels per day of additional oil production since it began work in mid-2013, ConocoPhillips said in its statement. The second rig, Nabors 9ES, began work in February and has so far resulted in the addition of 2,600 barrels per day of new production, the company said.

BP, which also operates on the North Slope, has also contracted for new drill rigs. The company will employ one new rig in 2015 and one new rig in 2016. BP also contracted for two new rigs in 2012 but that was before the passage of SB 21.

Putting new drill rigs to work is the quickest way to add new oil production because the work can be done in existing fields. Development of new fields, however, typically takes several years. Since SB 21 passed, ConocoPhillips has increased its drill fleet by 50 percent, from 4 rigs to 6 rigs. When Doyon 142 goes to work that will be 7 rigs.

With additional rigs both ConocoPhillips and BP have stepped up “workovers” of older producing wells as well as the drilling of new wells in the producing fields in the last year. Additional oil production that has resulted has essentially ended, for this year at least, a long-term decline in North Slope oil production.

Actual oil production in fiscal year 2014, which ended June 30, is about the same as actual oil production for the previous fiscal year of about 531,000 barrels per day. The fiscal year 2013 decline was 8 percent and the long-term decline has been 6 percent per year, according to the state Department of Revenue.

Aside from workovers and new wells in the producing fields, ConocoPhillips has also announced new oil projects that represent $2 billion in new investment and which will add 40,000 barrels per day in new production in 2018.

The projects include Greater Moose’s Tooth No. 1 in the National Petroleum Reserve-Alaska, new Drill Site 2S and an expansion of the West Sak viscous oil production in the IH NEWS project, both in the Kuparuk River field.

07/31/2014 - 10:22am