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Advancing Alaska ConocoPhillips investing where it can; latest Slope discovery Coyote Kay Cashman Petroleum News
Alaska got encouraging news in the June 30 ConocoPhillips market update, including the planned development of a new North Slope oil discovery, Coyote. It’s on the western side of Kuparuk, and to the east of Nuna (see map in pdf or print version).
The big Willow development in the National Petroleum Reserve-Alaska has one more hurdle before the company moves to FID, or final investment decision, near the end of the year; and that is a district court decision expected in third quarter. Although appeals are possible, ConocoPhillips Chairman and CEO Ryan Lance is confident the company will ultimately prevail.
Because of that final uncertainty, a capital allocation for Willow is not included in the updated 10-year plan presented June 30, but Lance made it clear the company had both the “flexibility and capacity to fund” the project should it advance.
Nick Olds, senior vice president of global operations, including Alaska, said the northernmost state “will continue to play an important role in our company for years to come. We have a proven 40-year history as a proven, responsible operator with relationships that run deep,” noting that “Alaska consists as of a set of world class oilfield developments that leverage infrastructure hubs”; from east to west, they are currently Prudhoe, Kuparuk and Alpine. “Years after the development of these hubs, we continue to identify and invest in low cost of supply projects that are capital advantaged because of access to existing infrastructure,” he said.
A company source told Petroleum News permitting work for the Coyote discovery has already begun.
ConocoPhillips also has a long track record of identifying new development opportunities that arise from technology advancements that have occurred on the North Slope in recent years, Olds said. “Technology such as extended reach drilling and coiled tubing drilling enable us to reach more resource from longer distances - and with a reduced footprint.”
Today’s plan, he said, “has an extensive inventory” of new developments, such as Nuna and Eastern News in the Kuparuk field, and Narwhal in the western North Slope area.”
The company has its “bread and butter work” across the area as well, “including the recently discovered Coyote trend in Kuparuk and our extended reach drilling rig, or ERD program, in the western North Slope,” Olds said.
“Over the next 10 years the Alaska fields are expected to deliver about 800 million BOEs of production at an average cost of supply of less than $30 a barrel on a WTI basis.” He said ConocoPhillips expects these development programs will more than offset their base decline of more than 4%, which is a 2% improvement from the company’s 2019 10-year plan. It allows ConocoPhillips to maintain production at more than 200 million barrels of oil equivalent per day in Alaska.
Alpine case study “Like all great Alaska fields … Alpine can be summed up in a simple statement: Big fields get bigger,” Olds said.
Alpine was sanctioned more than 20 years ago, “approved as a 430 million BOE standalone development that included a single processing facility and two drill sites. Since then, cumulative production has been nearly 600 million BOEs or 30% beyond the initial estimates of recoverable oil,” Olds said. “Currently we have identified, plans in hand, of expected yield of another 600 million BOEs of future production. That means our current estimate of ultimate recovery could be almost three times greater than our estimate at project approval.”
Future inventory cost of supply has been estimated to be less than $30 per barrel on a WTI basis, he said, “reflecting that infrastructure advantage that makes these assets so attractive,” Olds said.
Current project update ConocoPhillips Great Mooses Tooth 2 is on schedule and under budget for startup later this year, Olds said. GMT-2 is projected to yield about 30,000 BOEs per day, which he said will restore rates to what they were about 10 years ago.
The extended reach drilling rig is now drilling the first Fiord West well from the existing CD-2 pad, which is about 7 miles to the north.
“This will test more than 45 million BOEs of resource from the existing CD-2 pad,” Olds said. “It will be tied back to infrastructure and is scheduled for first oil later this year. This is what we call growth without new gravel.”
Willow next hub “We believe Willow could be the next great Alaska hub,” Olds said.
“We’ve now completed our appraisal of Willow; a 12-well program that de-risked the resource,” he said, noting that the information had been incorporated into the company’s front-end engineering and design, or FEED.
“We’ve had several years to consider and evaluate various plans of development using our optimization models,” Olds said, concluding that “the highest economic value will be achieved using a modularized central processing facility with a capacity of 180,000 barrels of oil a day and 250 million cubic feet per day of gas handling.”
Field development will require approximately 200 wells, which will be drilled from only three drill sites to minimize the footprint and “enabling us to capture efficiencies,” Olds said.
“On our current timeline, first oil occurs about 6 years after we make our final investment decision, or FID, and we’re on a path to have FID completed by year-end - if the litigation uncertainties are resolved.”
“At 100% working interest, we estimate the project requires approximately $6 billion of capital to first production, including pre-drilling development wells,” Olds said, estimating investment for the total plan of development will be approximately $8 billion to develop the recoverable resource, which is estimated at 600 million BOEs.
Willow is “very competitive” on a cost of supply basis in the mid-$30s per barrel, he said. “And we’ve identified up to 3 billion BOEs of nearby prospects and leads with similar characteristics that could leverage the Willow infrastructure.”
Olds said ConocoPhillips has “every reason to believe Willow should and will be developed.”
Q&A Willow One of the first questions asked in the Q&A session was for more details about the “gate factors for Willow” before moving to FID. “How do you know the coast is clear before moving ahead with the project?”
“We hope this will be resolved later this year. You saw the Biden administration cleared up the review of the record of decision. That was a very … positive outcome,” Olds said, noting the company expects the Alaska District Court to rule in third quarter. It has helped, he said, to have so much stakeholder support, such as from the North Slope Borough and the State of Alaska.
“I would add,” Lance said, “that this isn’t unusual for Alaska. Just about every major project up there has gone through this, so we know what’s coming, we planned for it, and we know how to deal with it.”
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