ConocoPhillips to resume drilling on Alaska's North Slope

Anchorage, Alaska — ConocoPhillips plans to restart drilling on Alaska's North Slope before the end of the year and will have four rigs operating in 2021, company officials said Wednesday.

The decision follows the defeat of a voter initiative in Alaska's Nov. 3 state election that would have increased state taxes in three of the largest producing fields on the slope, ConocoPhillips Alaska CEO Joe Marushack told a business conference in Anchorage.

Resumed drilling will put two new production projects, Fiord West and GMT-2, back on schedule to add 55,000 to 60,000 b/d of new production from the slope in 2022. About 500,000 b/d is now being produced.

"Since April, when COVID-19 caused oil prices to drop ad we were facing a potentially large increase in oil taxes, we've had no rigs running in the Prudhoe Bay, Kuparuk River and Colville River units," Marushack said.

Alaskans defeated Ballot Measure 1 heavily Nov. 3, with 199,186 voting no on the measure, or 57.8 percent, against 145,193 voting yes. Oil prices are still down, at about $43/barrel for Alaska North Slope crude oil, but the defeat of the tax and the ConocoPhillips' success with protocols to prevent spread of COVID-19 caused the company to reconsider its decision to lay down the rigs.

The decision affects only operations ConocoPhillips controls in the Alpine and Kuparuk River fields, along with projects in the National Petroleum Reserve-Alaska. As yet there is no decision to resume drilling in the big Prudhoe Bay field, Maru shack said. Prudhoe is now operated by Hilcorp Energy.

All three Prudhoe owners, Hilcorp, ConocoPhillips and ExxonMobil, must agree to restart drilling at Prudhoe, Marushak said.

Hilcorp has continued to operate two rigs at the Milne Point field adjacent to Prudhoe and where the company is sole owner as well as operator. Hilcorp took over at Prudhoe operator after acquiring BP's upstream Alaska producing assets in July.

Marushack said the first rig to restart will be before the end of the year at CD-5, a satellite of the Alpine field, where drilling was halted In April. That will be followed by the completion of commissioning on a heavy extended-reach drilling rig in the Alpine field that will be used to drill horizontal production wells in the Alpine field.

The new rig, built to drill long extended-reach wells into Fiord West, an oil deposit in the Alpine field, arrived on the slope last winter and was being assembled when the shutdown order came in the spring. Fiord West is expected to have peak production of 20,000 b/d.

Drilling of production wells will also start in early 2021 at GMT-2, a new ConocoPhillips project in the NPR-A that is to be producing by the end of 2021. GMT-2 is expected to see peak production of 35,000 b/d to 40,000 b/d, ConocoPhillips has said.

Although drilling of development wells in producing fields is being restarted, ConocoPhillips plans no exploration drilling this winter, according to company spokesperson Rebecca Boys. In previous years the company has been an aggressive explorer, focusing on areas of the western North Slope near the producing Alpine field and in the National Petroleum Reserve-Alaska, where several discoveries have been made.

In a related development, Marushack said a decision on final engineering and design will be made in December for Willow, a new discovery by ConocoPhillips in the NPR-A that is in the final planning and permitting stages. If construction proceeds at Willow production could begin in 2026 at over 100,000 b/d, the company has said.

Willow's capital cost is now estimated at $6 billion with $3 billion to be spent in the initial construction. It is significant because it will have its own on-site oil and gas process plants. Three other NPR-A projects developed by ConocoPhillips, CD 5, GMT 1 and the soon-to-be producing GMT-2, send unprocessed fluids, mixtures of oil, water and gas, to process plants in the nearby Alpine field.

Willow is too far away from Alpine to do that, however.