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Oil Company First to Draw Crude From National Petroleum Reserve

Arctic petroleum exploration is increasing with unprecedented speed. Global oil companies are investing billions to claim massive petroleum reserves in northern Alaska. ConocoPhillips is one of the biggest players with significant interests in Alaska’s North Slope. An oil and gas reserves evaluation conducted by the U.S. Geological Survey showed that Arctic holds some 90 billion barrels of unexplored oil.

The idea that the Arctic holds astounding quantities of gas and oil is not new. Today, the National Petroleum Reserve-Alaska (NPR-A) is ripe for commercial exploration. This 23-million acre area was designated as a protected oil reserve by President Warren Harding in 1923. It was his mission to save petroleum reserves for the U.S. Navy. However, in 1976, the parcel was transferred to the Bureau of Land Management. Securing leases and accessing the petroleum reserves was not very easy.

After years of debate and bureaucracy, ConocoPhillips became the first commercial oil producer to successfully explore & drill an oil lease in the NPR-A. A permit to develop a well was approved in at the end of 2011. In October 2015, the first oil from this billion-dollar Colville-Delta 5 (CD5) field reached the surface. At the same time, Royal Dutch Shell was shutting down its costly and unsuccessful offshore platform a few hundred miles away.

Conoco’s CD5 field is an example of arctic oil exploration done properly. Although the wells are within the NPR-A, the land is owned by indigenous Alaskans. The nearest community is Nuiqsut, which is at the western edge of the reserve. One of the obstacles was coming to an agreement with Kuukpik Corporation, a native village entity representing Alaskans who live a subsistence lifestyle.

Kuukpik held its ground and had Conoco move a bridge and transportation route to ensure that locals would be able to continue fishing. Isaac Nukapigak, the president of Kuupik, said that the corporation made certain that “CD5 was developed responsively” and is “a win-win” for Alaskans and ConocoPhillips. Taxes and employment in CD5 and Cocono’s neighboring Alpine drilling and processing facility are expected to be a boon for the community.

The projected peak gross production from DC5 is 16,000 barrels per day. ConocoPhillips plans to have 15 wells in the area by 2017. Past and current exploration ensures that ConocoPhillips will keep its position as Alaska’s largest oil producer. Unlike some competitors who have had significant opposition from environmental groups, Conoco has an excellent track record in the Arctic, which has reduced hostility.

Conoco’s existing facilities are positioned to minimize the impact on wildlife and local residents. At the company’s Alpine facility on the North Slope, horizontal well technology allows Conoco to manage a 50-square-mile area from a single drill pad. Conoco has moved into a competitive and highly desirable area by working with government agencies and local decision makers. Strong oil and gas risk assessment programs are a big asset for companies that want to develop oil wells in sensitive areas. It also helps to silence the opposition and get projects approved more quickly.

Conoco is the most successful exploration company in the NPR-A and the Arctic. Between investors, environmentalists and safety regulations, there is no room for second chances. Shell suffered a big blow when it shut down its $7 billion platform 100 miles off of Barrow, Alaska. Conoco has had smaller investments and more room for returns. Technology, safety, cost, infrastructure and reserves evaluations must be addressed fully. With the large investments, petroleum economics courses that address the probability of all outcomes are vital for companies that are exploring arctic reserves.

Experts say that arctic oil investments will reach $100 billion by 2022. It is up to consultants and in-house professionals to minimize risk and make decisions that maximize profits.

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