ConocoPhillips considers $1B West Sak expansion

ConocoPhillips is planning a limited expansion of its West Sak viscous oil production in the Kuparuk River field on the North Slope and is evaluating a potential new area of conventional oil development in the field, company officials told state legislators in a briefing Feb. 24.

However, ConocoPhillips’ board must give the final approval for the project and  decisions will be influenced by pending legislation in Juneau, where the Legislature is considering modifications to the state oil and gas production tax.

West Sak is now producing about 15,000 barrels per day but previous plans to expand output have been plagued by a series of technical problems including waterflood “breakthrough,” or the channeling of water through the producing zone from a waterflood project, as well as higher than expected costs.

“We have learned important lessons and we are now ready to begin the next phase of development,” in an area called the North East West Sak area, Scott Jepsen, ConocoPhillips’ Alaska external affairs vice president, told the Senate Resources Committee. “We will likely develop a portion of this area at first to see if we can identify the best area,” and to the techniques we have developed to solve problems encountered earlier.

ConocoPhillips is still concerned with the state tax, because at its current rate, the state takes most of the gain if there is an increase in oil prices. Companies developing economically marginal projects like West Sak need to be able to capture some gain if prices increase to balance the risks of costs and technical problems, Jepsen said.

The total North East West Sak project, if it goes ahead, could involve an investment from $1 billion to $2.5 billion depending on the scope, and would potentially include 115 new wells on one to two new drill pads, and an addition of 150 million barrels of viscous oil to reserves at the Kuparuk field.

Kuparuk is a large conventional oil field west of Prudhoe Bay that has produced about 2.5 billion barrels of oil to date. The company began working on the technically challenging West Sak viscous oil deposit within the field in the late 1980s, but has had only limited success in its development.

Over the years the company has wrestled with problems like sand entering the well bore from the unconsolidated reservoir rocks to the recent problems with water breakthrough.

The West Sak overlies a large part of the Kuparuk field but parts of the deposit to the west of what is now being considered for development are shallower, cooler, and a lower quality of oil, Jepsen said.

BP is also producing viscous oil on a limited scale from the Schrader Bluff deposit within the nearby Milne Point field.

Viscous oil on the Slope is thick and slow-flowing, with a consistency something like maple syrup. It is typically rated at 18 degrees to 19 degrees API in quality as compared to the conventional oil of the Slope rated at about 29 degrees API.

On the conventional oil front, ConocoPhillips also is evaluating results of its Shark Tooth appraisal/exploration well drilled recently at the southwest periphery of the Kuparuk field. The well encountered conventional oil resources in the Kuparuk A sandstone reservoir interval, a zone that is productive in the main part of the Kuparuk field, Jepsen said. The results are still being evaluated.

In terms of general Kuparuk field activity in 2012, Jepsen said ConocoPhillips is expecting to do 20 to 40 well “workovers,” which are maintenance or repair jobs on producing wells, as well as 12 to 13 new wells drilled with a coiled-tubing rig, a specialized drilling unit that typically drills sidetracks, or new wells off older, existing wells with a drill unit working downhole at the end of a length of flexible tubing.

In addition, a conventional rotary drill rig will be used to drill three to four new wells drilled from the surface.

The company will also be evaluating results of a large 220-square-mile seismic survey across the field done in 2011. This is intended to locate undetected faults that can impede the flow of oil, and to identify possible new drilling targets.

03/01/2012 - 7:50am