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DNR optimistic about NS future production
Senate Finance hears background on fall oil production forecast, review of upcoming Slope projects from Division of Oil and Gas
Kristen Nelson Petroleum News
The Alaska Legislature's Senate Finance Committee kicked off its 2024 hearings with an overview by the Department of Natural Resources' Division of Oil and Gas of its fall 2023 oil production forecast, introduced by DNR Commissioner John Boyle and presented by Travis Peltier, petroleum reservoir engineer with the Division of Oil and Gas.
Boyle said there is a boom in investment on Alaska's North Slope with major projects, years in the making, underway. He cited a stable and predictable climate for investment, the Slope's great rocks and technological advances as all playing a part in creating what he called a "very exciting trajectory."
At the end of the 10-year forecast window, he said, North Slope production is forecast at some 630,000 barrels per day, up from today's average of some 480,000 bpd, with major commitments including ConocoPhillips' final investment decision at its Willow project, Santos in construction on the first phase of Pikka, and a major exploration project on the eastern North Slope, with Apache coming back to the state in partnership with Armstrong.
Among challenges Boyle listed are strains on the workforce and infrastructure because of the volume of projects underway and some headaches in the economic climate.
But overall, he said, DNR is "very optimistic."
Accuracy of last year's forecast Peltier said DNR looked at how its fall 2022 forecast compared with actual fiscal year 2023 production. DNR's mean forecast, he said, was some 3% higher than actual FY2023 production, July 1, 2022, through June 30, 2023. Actual production was 479,380 bpd, compared to DNR's forecast of 491,727 bpd and the operators' forecast of 482,661. He said the operator's forecast is an amalgamation by DNR of forecasts by individual operators.
Several factors shape the forecast, Peltier said:
*The interest of industry in Brookian age plays -- Nanushuk -- on the North Slope.
*ESG -- environmental, social and governance -- influences, which affect capital allocation decisions.
*Changes in federal regulations and leasing restrictions.
What occurred in FY23 North Slope fields generally are in decline, although compared to FY22, FY23 North Slope production was up some 1%.
Peltier listed decreases from FY22 to FY23 at Badami, where the best well was down; natural decline, despite development drilling, at the Colville River and Kuparuk River units; natural decline at Endicott and Northstar; and technical issues with the single production well at Point Thomson
Increases occurred at Greater Mooses Tooth, where development drilling occurred at the GMT2 pad; infill drilling and rig workover efforts at Milne Point, Nikaitchuq and Oooguruk; and improved facility reliability and gas throughput at Prudhoe Bay.
Key future projects Peltier reviewed the status of five key future projects -- two very large new developments and three smaller in-field developments.
The Santos-operated Pikka project, which received its FID, final investment decision in 2022, by January of this year was under construction with drilling ongoing and first oil projected in the second quarter to 2026, with phase 1 estimated by DNR to peak at 80,000 bpd.
ConocoPhillips' Willow received a record of decision from the Bureau of Land Management in 2023. The company started construction in April 2023, with FID in December 2023; first oil is expected in 2029, peaking at 180,000 bpd.
ConocoPhillips' Colville River unit Narwhal CD8 project expects first oil in 2030, pending stakeholder alignment, permitting and internal studies, with peak production estimated by DNR at some 32,000 bpd.
Construction is underway at Hilcorp Alaska's Milne Point Raven or R Pad, with DNR estimating peak production at 10,000 bpd.
And at Nuna-Torok in ConocoPhillips-operated Kuparuk River construction is underway on drill site 3T expansion, with first oil expected in 2025 and peak estimated at up to 20,000 bpd.
Under evaluation Peltier said DNR looked at 15 major North Slope projects in its fall 2023 forecast: all not online by the end of FY23, with higher risk factors than producing fields, but known discoveries with identifiable operators with major investment required.
He listed: Willow, CRU Narwhal CD8; Horseshoe Stirrup, Pikka unit development, Pikka phase 2, Quokka/Mitquq, Nuna-Torok, MPU Raven Pad, Theta West, Talitha, Alkaid, Libert, PTU expansion and Sourdough.
Two projects DNR moved from the under evaluation category to the future watch list are Umiat and Smith Bay, Peltier said, citing distance from infrastructure.
Forecast for FY24 For FY24, July 1, 2023, through June 30, 2024, a chart in the DNR presentation shows the official forecast at some 470,000 bpd, increasing to more than 630,000 bpd in FY33. By comparison, the operator forecast, the amalgamation of what various operators are forecasting, is some 420,000 bpd in FY33.
Peltier said the large difference is explained by the fact that the operator forecasts which DNR receives do not include future projects.
The Department of Revenue's Fall Forecast shows FY24 North Slope production at 470,338 bpd, dropping to 463,771 bpd in FY25 before starting to rise: 473,136 bpd in FY26, 516,515 bpd in FY27, with some ups and downs through FY30, before a steady climb to 632,993 bpd in FY33.
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