ConocoPhillips starts up new Alaska oil project

ConocoPhillips has started production at its GMT-2 oil project in the National Petroleum Reserve-Alaska. The project is expected to produce 30,000 b/d at peak.

"The GMT2 team safely executed this project in an environmentally responsible manner marking another successful milestone for the NPR-A," Erec Isaacson, president of ConocoPhillips' Alaska unit, said Dec. 12.

GMT-2 development costs were $1.4 million and it was completed under budget and on schedule, the company said in its announcement. It is the third oil project to be developed commercially by ConocoPhillips in the petroleum reserve, a 23-million-acre federal land enclave west of the major producing fields of the North Slope, which are on state-owned lands.

GMT-2 and two other, nearby projects, GMT-1 and CD-5, are considered "satellites" of the larger producing Alpine field, also owned and operated by ConocoPhillips, because they are tied by pipelines to the Alpine oil processing facilities.

Raw crude oil, a mixture of oil, water and natural gas, is shipped by pipeline to the Alpine field where the water and gas are separated. The Alpine field is on state lands in the Colville River delta. The river is the eastern boundary of the NPR-A.

GMT-2 is eight miles southwest of GMT-1, a similar project now producing, which itself is about eight miles west of CD-5, which is near the Colville River and the Alpine field.

The new project has a 14-acre drill pad, an eight-mile gravel road and pipeline facilities connecting it to the existing Alpine field infrastructure. The pad will have 36 wells initially with a plan for expansion to 48 wells.

While the current production estimate for GMT-2 Is 30,000 b/d at peak ConocoPhillips has said in the past that it believed the project to be capable of 35,000 b/d to 40,000 b/d. The current, more conservative estimate may be based on the company's experience with the nearby GMT-1, where some wells performed below expectations.

In contrast, CD-5, a few miles east, has been consistently producing above predictions since it began production. ConocoPhillips said it has carried out extensive production tests at GMT-2 to confirm its modeling for the new project.

A new, larger ConocoPhillips project, Willow, is about 10 miles further west of GMT-2 and will have its own oil proceeding plant at the location. Willow is at an advanced stage of engineering but it currently delayed by lawsuits filed by conservation and tribal groups.

Planning and permitting has been underway since 2015 with the US Bureau of Land Management, which administers the federal reserve.

An interesting aspect of GMT-2 is that the mineral rights and royalties are shared between the federal government and two Alaska Native corporations of the North Slope, Arctic Slope Regional Corp., of Utkiagvik (formerly Barrow) and Kuukpik Corp., which is owned by the Inupiat residents in the nearby village of Nuiqsut.

The two Native corporations secured rights to the minerals under terms of the 1971 Alaska Native Claims Settlement Act. ASRC and Nuiqsut similarly own royalty rights in GMT-1 and CD-5. Five other Inupiat villages on the North Slope share indirectly in the NPR-A royalties through a share of royalty that goes to the state of Alaska and is then designated to support public services in the villages.

Although the NPR-A was created in 1923 as a potential oil reserve for the US Navy (it was then Naval Petroleum Reserve No. 4, or NPR-4) there were no significant discoveries despite decades of exploration led mostly by the Navy and the US Geological Survey.

It was only in recent years when exploration was done by private companies and with modern technologies like "3-D" seismic and horizontal drilling, that discoveries capable of commercial production were made.

Isaacson, ConocoPhillips' head in Alaska, said the new projects will bring multiple benefits to the state and nearby Inupiat communities. "Projects like these continue to create hundreds of jobs in Alaska and contribute to a stable Alaska economy," which has been stressed by pandemic-related cutbacks in oil employment. "Our continuous investment in projects on the North Slope benefits Alaska's future," he said.