Although Lower 48 unconventionals hold the top position in ConocoPhillips’ 10-year plan from 2020 through 2029, the company’s Alaska North Slope conventional oil assets still play a significant role.
Unveiled at the company’s analyst and investor meeting Nov. 19 in Houston, Alaska plans were largely provided by Michael Hatfield, president, Alaska, Canada and Europe, who said drilling results at the western North Slope’s Narwhal and Willow prospects were “bigger and better” than expected.
With these two projects moving toward development and a lot of upside resource potential in the company’s exploration acreage, Hatfield and other ConocoPhillips executives said the company would bring in a 25% partner for its 100% owned western North Slope acreage in 2020-21. This is “consistent with the company’s historical practice of not funding major project expenditures at 100 percent.”
Regarding upside exploration potential, 75% of ConocoPhillips’ exploration acreage is undrilled (see map in pdf and print versions of this story), with 13 exploration prospects already identified through 3D seismic, including Harpoon, which will be drilled this coming winter, “the next in a series of prospects to drill,” Hatfield said.
When asked to provide “more color around” the 25% farmout during the Q&A session, ConocoPhillips CEO Ryan Lance said the action was “consistent with our policy and … prudent in how we balance risk across our portfolio. … We’re pretty confident we’ll have a lot of interest. … Alaska is one of the best exploration plays in the world.”
Hatfield said “with this sell down we will be producing 180,000 barrels a day and have significant running room” with the North Slope’s conventional assets.
As far as proven untapped reserves, ConocoPhillips has approximately 2.5 billion barrels of oil equivalent remaining in northern Alaska, where its produced liquids are 95% oil.
Investment in Alaska
ConocoPhillips intends to keep its total company-wide capital budget shy of $7 billion a year.
Over the 10-year period, Lance said about $25 billion in capital is planned to be invested “across three assets in Alaska … plus possibly about the same again in operating costs.”
The state’s major competitor for ConocoPhillips capital investment is the Lower 48, which is the firm’s fastest growing region in terms of production and free cash flow due to high margin growth in the Big 3 unconventionals, the Eagle Ford, Bakken and Permian. The Lower 48 will get 50% of the total capital budget over the next decade - something under $35 billion.
Narwhal update
The long-term flow test on the 2019 Narwhal horizontal well drilled last winter from drill site CD4 “exceeded expectations” with a peak test rate of 4,500 barrels of oil per day, Hatfield said. “We encountered a consistent, thick oil-bearing sand along the full length of the horizontal lateral. The well test established high productivity.”
Narwhal’s single well upped its estimated ultimate recovery, or EUR, by 150-400 million barrels of oil equivalent.
At Narwhal production is slated to start in 2022 through the Alpine facilities and will continue “relatively flat for many years,” Hatfield said.
“We discovered the Narwhal accumulation (in geological terms the Nanushuk formation) in the 2018 drilling season with two exploration wells and an appraisal sidetrack.”
Willow update
In last winter’s drilling season at Willow “we completed two horizontal and four vertical appraisal wells to further delineate the reservoir and increase our confidence in our resource,” Hatfield said, later noting Willow was 26 miles long and 10 miles wide.
The two Willow horizontal wells, which averaged over 2,500 barrels a day, also exceeded expectations, he said.
“Because of the limited drilling season and the limits on the test equipment these wells only had 2,000 foot laterals. This is only about 20% of the lateral length of the future development wells,” Hatfield said.
ConocoPhillips also conducted two interference tests from the new vertical wells which were 1,800 feet away from previous wells. This involved injecting water in the new wells and monitoring the pressure responses in the existing wells.
“We chose 1,800 feet because that’s the well spacing in development and we wanted to test transmissibility across that distance,” Hatfield said.
“The dynamic production and injection tests achieved an excellent response. These interference tests have clearly demonstrated that water flooding will economically increase recovery,” he said.
As a result of testing the company increased the EUR at Willow by 450 million to 800 million barrels.
Harpoon, other winter drilling
One more winter drilling season is needed to finalize the appraisal of Willow and Narwhal, Hatfield, said.
“Harpoon has a similar seismic signature to Willow and Narwhal,” suggesting it has the “potential for stacked play horizons,” he said.
In the Q&A session, ConocoPhillips execs were asked what they needed to have an economically viable development at Harpoon - and what size they were chasing.
Matt Fox, EVP, exploration and production, said it wasn’t a good idea to share that information ahead of drilling, but given the seismic signature, it “looks like there could be … quite substantial resources. Now it could be gas and it could be water. It’s almost certainly a reservoir, because we’re pretty sure that’s what the seismic signature’s telling us … but it doesn’t have to be huge for it to be a tieback to the Willow hub.”
In his presentation Hatfield said at Narwhal “we are currently drilling an injection well … 1,800 feet away from the production well we just tested from the same Alpine pad. Later this year we expect to complete this injection well to test reservoir connectivity, much like the interference tests we ran at Willow,” he said.
The upcoming winter drilling program will consist of four appraisal wells at Willow and three exploration wells at the undrilled Harpoon prospect, 25 miles southwest of Willow. It has “high-potential Brookian topset targets with stacked plays,” Hatfield said.
The Willow wells will help further define its resource range because ConocoPhillips has “yet to encounter gas or water contact,” he said.
Narwhal, Willow development
Regarding Narwhal, Hatfield said nearly half the development wells will be drilled from the CD4 pad.
“We’ll feed production into our existing Alpine facilities in 2022. We’ll also build a new pad, CD8, to access the remaining Narwhal inventory.” ConocoPhillips plans to start production from that pad in 2025.
“We already know Willow will be a new hub for the North Slope,” he said. “The conceptual pad layout is something like this - three to four drill pads, a central facility and other supporting infrastructure. ... We expect to FID the project in 2021 and have first production in the 2025-26 timeframe.”
The 10-year plan has $5 billion in capital for Willow and Narwhal with total peak oil rates of 70,000 barrels a day, Hatfield said.
“Our engineer teams are working options now on facility sizing, module construction and transportation. …We are considering an alternative that would increase capacity and redirect GMT-2 to Willow. This would open capacity at Alpine for incremental Narwhal … and ERD production,” he said.
“Our total overall resource range from Willow and Narwhal has increased 600 million to 1.2 million barrels with a P-50 of 900 million barrels with a cost of supply base plan of $35 a barrel,” Hatfield said.
In and near existing fields
Taking what he called “a high level look” at ConocoPhillips’ “prospect and drilling program across and adjacent to our existing” North Slope fields, Hatfield said over the last few years the company has reduced its base decline rate from 8% to 6%, mitigating decline by improving waterflood management and enhanced oil recovery by optimizing the allocation of water and gas injection, which has “improved recovery in those areas up to 60%.”
“We’re using data analytics to quickly identify opportunities where we can optimize our gas lift operations. This helps mitigate our base decline,” he said.
“Lastly, by optimizing our maintenance activities we’ve improved our up time by 4%,” Hatfield said,
“Going forward we’re using predictive analytics and artificial intelligence to minimize down time on critical equipment. … And we have a lot of growth opportunities to layer on top of this strong base,” he said, noting “over the last 40 years at Kuparuk and Alpine we’ve brought online 54 operated drill sites. We’ve added four new drill sites in the last 5 years - these include CD5 and Alpine and our initial development of the Northeast West Sak area at Kuparuk.”
The company has invested more than $2 billion gross in these four projects with the cost of supply around $30 a barrel.
The projects came in 7% under budget and delivered 5% more resource than expected and represent 35% of ConocoPhillips’ current operated North Slope production, he said.
“The most significant is GMT-2. It was sanctioned last year and has first oil in 2021,” Hatfield said, with $1.4 billion invested, it will have 48 wells and be produced into the Alpine facilities. “It extends our infrastructure to the west and has a cost of supply of $18 a barrel.”
The Nuna project, acquired earlier this year, will have first oil in 2022 with a tieback that leverages the Kuparuk facilities, he said.
“The Eastern NEWS area is a continuation of our successful West Sak development. We plan to develop this area with 20-25 wells from new Kuparuk drill sites,” all of which will be multi-lateral horizontals, Hatfield said.
“We also have several incremental projects at Prudhoe Bay which will be executed in the near future,” he said.
