What have the North Slope producers done since Senate Bill 21 passed the Legislature?
They’ve ramped up drilling and ended a 24-year decline in North Slope oil production, that’s what. As recently as last December the state estimated a 4.4 percent decline for this year.
That’s now history.
The companies have also announced $8.5 billion in new projects that could add more than 100,000 barrels per day in new oil over the next eight years. This is in addition to $5 billion in new projects, mainly the Point Thomson gas project east of Prudhoe Bay and the CD-5 oil project near the Alpine field, that are already underway.
But for now — and most important immediately — production from the North Slope fields will result in about the same amount of oil this year as last year. The decline will have essentially stopped, at least for this year.
For the fiscal year 2014, production averaged 530,939 barrels per day compared to average production for the previous fiscal year of 531,639 b/d. The state fiscal year runs from July 1 through June 30.
Were it not for typical summer maintenance that reduced output by about 40,000 barrels per day in June compared to May, production would have exceeded the prior fiscal year.
The figures are subject to adjustment, said Cherie Neinhuis, a petroleum analyst with the state Department of Revenue, but the data indicates the state ended the 2014 fiscal year on June 30 with North Slope output roughly on par with the previous year.
This is a significant achievement because the average decline in production has been about 6 percent per year in recent years and was 8 percent between 2012 and 2013, according to the Revenue Department data.
A lot of new projects are being announced, but the real action, for now, is in big producing fields, the “legacy” Prudhoe Bay, Kuparuk River and Alpine fields, where the companies have ramped up drilling and “workovers” of wells. All of this has happened since the Legislature passed SB 21 in April 2013.
ConocoPhillips and BP, the two major North Slope field operators, have added four drilling rigs to their operations.
BP decided to add two rigs before the tax change was made, spokeswoman Dawn Patience said. However ConocoPhillips’ two rigs were added after the tax change, said Scott Jepson, ConocoPhillips’ vice president for external affairs. BP will have two additional rigs working by 2016, Patience said.
The best way to add new production, and to sustain it, is to get more rigs drilling wells, said Jepsen.
“If you want to see real progress, get more rigs working. New projects will enhance production at the margin but to really sustain production, new oil has to come from the legacy fields and drilling more wells is the best way to achieve that,” Jepsen said.
Jepsen said one of the two workover rigs put to work mainly repairing older wells has so far resulted in 3,000 barrels per day of new production. That rig went to work in mid-2013. Production results from the second rig, which was started up this spring, are not yet available because it has been drilling new wells that are not yet hooked up.
BP has also increased its well work aimed at stimulating new production by 20 percent this year and has increased its spending on this kind of work by 40 percent, Patience said. The company is doing “rate-enhancement” projects on 500 wells this year, an increase of 100 from last year.
When rigs are drilling new production wells in the fields, the added production can be significant.
Ed King, an economist with the state Department of Natural Resources, said in a previous interview that each working drill rig on the North Slope typically completes six new producing wells a year, and each new well can add 800 to 1,000 barrels per day of new production.
It’s a rule of thumb, King said, because each drilling situation is different. Also, some drill rigs work on workovers as well as new wells.
Drilling and working over wells in the legacy fields can add production relatively quickly, Jepsen said. The uptick in production over the last year, reversing the production decline, illustrates that.
What is most important, Jepsen said, is that the bulk of the remaining known undeveloped oil resources of the Slope that are known are actually within the currently producing fields. That is about 4.5 billion barrels out of 5 billion barrels in total of known resources.
The companies have also announced new North Slope projects since SB 21 was passed, and those are also significant. Projects announced by ConocoPhillips alone could add 40,000 barrels per day to production by 2018, Jepsen said, although those are subject to final approval by the company’s board in December.
This includes the new Drill Site 2S and North East West Sak project in the Kuparuk field and GMT-1 in the National Petroleum Reserve-Alaska.
BP is also working on its large Prudhoe Bay west-end development project that could add another 40,000 barrels per day after 2018, the company has said.
Other companies are at work also. Brooks Range Petroleum, a small independent company, intends to have its small Mustang field in production in 2016 producing 8,000 to 10,000 barrels per day and increasing in 2017 to about 12,000 barrels per day, company officials have said.
Caelus Energy, the new owner of the Oooguruk field, plans to develop Nuna, a satellite to the existing field, with preliminary construction beginning this winter. Nuna could produce between 15,000 and 20,000 barrels per day, Caelus has said.
Repsol, a major company, is exploring in the Colville River delta area near the Alpine field and has made new oil discoveries. The company is now engaged in evaluating the discoveries and is doing environmental and engineering studies for possible development, although that has not been announced.
Tim Bradner can be reached at [email protected]
North Slope Production barrel
FY 2014 is preliminary data, subject to change, based on 11 months of finalized data from monthly production off-take report and June derived from daily run tickets.
Department of Revenue, July 1