CP announces layoffs, and new permit app in NPR-A

There’s good and bad news in Alaska’s oilpatch.

ConocoPhillips announced Sept. 1 that it would lay off about 10 percent of the company’s 1,200 Alaska workers as part of a nationwide personnel reduction, all aimed at cutting costs.

On the same day, however, the company said it has applied for permits for a new North Slope development project, Greater Moose’s Tooth No. 2, or GMT-2. GMT-2 is the third oil deposit in the National Petroleum Reserve–Alaska ConocoPhillips is tackling with its minority partner, Anadako Petroleum Corp.

GMT-1, east of GMT-2, is now in an advanced stage of permitting, and CD-5, a project in NPR-A but adjacent to state lands and the producing Alpine oil field, is in the final construction stage and will be producing by the end of the year, ConocoPhillips spokeswoman Natalie Lowman said.

Permit applications were filed Aug. 24 with the U.S. Bureau of Land Management for GMT-2, she said.

Meanwhile, on the workforce reductions in Alaska, “We’ll know more in the next several weeks as we work through our formal process,” Lowman said. “Our industry is undergoing a dramatic downturn, which has caused us to look at our future workforce needs. As we have assessed the implications of lower prices on our business, we’ve made the difficult decision that workforce reductions will be necessary.”

Crude oil prices have plunged in the last year from more than $100 per barrel for Alaska North Slope oil to less than $50 per barrel in recent days. Prices are edging up again but the outlook is for depressed prices to remain for a period of time, most economists say.

In its second quarter results released Aug. 4, ConocoPhillips posted a loss of $179 million compared to a profit of nearly $2.1 billion during the second quarter of 2014.

Year-to-date total revenue is down from $30.7 billion in the first six months of 2014 to $16.7 billion in the first half of 2015.

Despite the cuts, ConocoPhillips is still working on new North Slope projects that will add production by the end of the year. Two new projects, Drillsite 2S as well as CD-5, are now in construction and will be producing by the end of this year.

Another new project, I-NEWS, an expansion of the West Sak viscous oil program in the Kuparuk River field, will be producing in early 2017 at 9,000 barrels per day.

CD-5 is expected to produce 16,000 barrels per day at peak, and 2S is to produce 8,000 barrels per day at peak.

“We have taken several significant steps as a company to strengthen our (company-wide) position, including reducing our capital spending and future deepwater exploration program,” Lowman said. “However, the workforce reductions are necessary to become a stronger, more competitive company. We are committed to treating all our employees with respect and fairness during this process,” she said. 

ConocoPhillips is still making capital investments, however. The company is spending about $1 billion to construct CD-5, with much of that money already invested, and would spend about $900 million on GMT-1, is that project moves ahead. GMT-1 is expected to produce 30,000 barrels per day at peak.

No estimates are available for expected production rates at GMT-2 or a capital cost estimate, Lowman said, but the proposed development plan calls for 48 wells. In comparison, GMT-1 will have 16 wells including producers and injectors.

Environmental groups are already criticizing the GMT-2 proposal, arguing that 75 acres of gravel “footprint” for a road, pipelines and production pad, will adversely affect wildlife habitat.

“This development will take place in the western Arctic and occur adjacent to an important wildlife area, home to a large caribou herd and migratory birds from across the globe,” said Lindsey Hajduk, Alaska spokeswoman for the Conservation Lands Foundation, in a statement.

The groups say ConocoPhillips is pushing the BLM to “fast track” the permit application when the agency is still several years away from completing a regional strategy for mitigation of impacts from onshore development.

The area ConocoPhillips proposes to develop, in both GMT-1 and 2, is inland and away from coastal areas of the Beaufort Sea which are more heavily used by migrating birds than inland regions. BLM has put special restrictions in place in the coastal areas to protect wildlife, in some areas barring exploration for oil and gas.

The National Petroleum Reserve–Alaska is a 23 million-acre block of federal lands in the western North Slope, west of existing large producing fields. The reserve was created in 1923, but despite extensive exploration no commercial deposits of oil and gas have been found until recently, when ConocoPhillips and Anadarko Petroleum made the discoveries at CD-5, GMT-1 and GMT-2.

09/02/2015 - 2:45pm