By Tim Bradner
Alaska Journal of Commerce

With oil prices high and gas pipeline negotiations apparently in a final stage, North Slope oil producers are in a buoyant mood.

ConocoPhillips Alaska Inc. says it will be spending $1 billion on new oil satellite fields near the Alpine oil field in the next three years, and recently completed a $500 million expansion of its West Sak viscous oil project in the Kuparuk River field

ConocoPhillips' Alaska president Jim Bowles told the Alaska Support Industry Alliance's annual "Meet Alaska" conference in Anchorage Jan. 20 that his company is on track to start production later this year on two of four new satellites to the Alpine oil field.

Construction and drilling are underway now on both of the satellites, Fiord and Nanuq, Bowles said. Fiord is expected to begin production in the third quarter of 2006 with 17 wells. Nanuq will begin production in the fourth quarter with 23 wells, Bowles said. Fiord and Nanuq are expected to produce 30,000 barrels per day at peak. Combined capital cost of the two projects is $500 million.

Bowles also said ConocoPhillips is working to secure permits for two other satellites to Alpine, "Alpine West" and "Lookout," located west of the main Alpine field in the National Petroleum Reserve-Alaska.

The NPR-A borders the Alpine unit area. The main Alpine field is on state of Alaska land and lands owned by Arctic Slope Regional Corp., the regional Alaska Native regional corporation for the North Slope area.

Bowles said the two NPR-A satellites are expected to begin production in 2008 and 2009. No production estimates were given, but capital costs of the two projects are also estimated at $500 million. This will be the first commercial production from the NPR-A, Bowles said.

Satellites are pools of oil near larger fields where the processing infrastructure of the larger field is used by the satellites to separate the gas, water and crude oil.

ConocoPhillips is the majority owner at Alpine and the satellites projects, with Anadarko Petroleum Co. as a minority owner.

In other developments, Bowles said production started late in December at the West Sak 1-J viscous oil production pad in the Kuparuk River field, which is operated by ConocoPhillips. It is the first West Sak stand-alone pad built just for viscous oil. Other pads used by the company for West Sak production were originally built for conventional oil production from the Kuparuk field. The company also began viscous oil production earlier in the year from new wells at 1-E pad, which was also originally built to support conventional production. Combined new viscous oil production from both pads is expected to peak at 45,000 barrels per day, Bowles said.

BP Exploration (Alaska) Inc. president Steve Marshall told the Meet Alaska conference his company will install an experimental $100 million low-salinity waterflood pilot project in the Endicott field to test a new approach in using water injection to stimulate oil recovery.

Marshall said that the project involves removing salt and other minerals from produced water and using saline-free water as an injectant. Tests show it could boost recovery by 15 percent over waterflooding with untreated water, Marshall said. If the pilot has the desired results, BP might be able to boost Endicott production by 30 million barrels of oil. If applied across the North Slope, the gain could be several hundred million barrels, he said. Work on the project will be underway this year and BP hopes to have it in operation in 2007. If the project is successful the company hopes to apply it worldwide, Marshall said.

ConocoPhillips plans 3-D seismic surveys this summer on 378,000 acres of highly prospective lands in the National Petroleum Reserve-Alaska recently opened for leasing by the U.S. Bureau of Land Management, Bowles said. The company will also participate in a 3-D survey in the Chukchi Sea, an Outer Continental Shelf offshore area west of the North Slope, he said.

Lease sales are planned in both areas. The BLM will conduct a lease sale in the NPR-A this fall that will include the 378,000 acres recently opened, while the U.S. Minerals Management Service plans a sale in late 2007 in the Chukchi Sea.

Bowles also said a $100 million project to manufacture ultra-low sulfur diesel fuel at a topping plant now in operation in the Kuparuk River field will be in operation in 2008. Facilities for a hydrotreatment unit in the topping plant will be shipped to the North Slope on a sealift in the summer of 2007. The plant will provide ULS diesel to North Slope operating companies and contractors, and is expected to result in a 40 percent reduction of sulfur dioxide over two years, Bowles said.

Tim Bradner can be reached at tim.bradner@alaskajournal.com.