Opinion: Alaska's Oil and Gas Future Looks Strong
Alaskans
worried that BP’s sale of its Prudhoe Bay assets to Hilcorp means Alaska’s oil
and gas potential is waning can be reassured: Hilcorp’s growing strength is
just the beginning of a new wave of investment and activity heralding a more
energetic phase in our resource-rich state’s top industry. Here are a few
examples.
When
we faced a potential gas shortage in Cook Inlet in 2012, Houston-based Hilcorp
was purchasing mature fields from Chevron and Marathon. Hilcorp then embarked
on a vigorous drilling and efficiency program, increasing oil and gas
production and ensuring reliable energy supplies for Southcentral Alaska.
Hilcorp
next took their plan north, buying in to four of BP’s North Slope units in
2014. Most recently they began producing viscous oil from their Moose Pad at
Milne Point, increasing field production to levels not seen in years. With
declining oil throughput in the trans-Alaska oil pipeline, Hilcorp’s aggressive
strategy is delivering the kind of results Alaskans need, and the jobs critical
to our economic security.
Oil
Search, a Papua-New Guinea independent new to Alaska, is systematically,
deliberately and thoughtfully pursuing its Pikka development, aiming to start
oil production in under four years. Pikka will create high-paying jobs and
boost state royalty revenue, and could increase pipeline throughput up to 2%.
Oil Search and its partners Armstrong, a Colorado independent, and Repsol, a
Spanish global oil company, have several other North Slope prospects that may
not be far behind.
U.S.
major ConocoPhillips may bring its Willow prospect online about the same time
as Pikka, increasing oil production by a similar amount. This expansion of
development westward from Alpine and Greater Moose’s Tooth into the National
Petroleum Reserve-Alaska will add critical infrastructure, making other western
prospects more commercially feasible.
London-based
newcomer Premier Oil, in partnership with Australian independent 88 Energy and
Texas independent Burgundy Xploration, plans to drill this winter to further
evaluate a block of leases called Project Icewine, 50 miles southwest of
Prudhoe Bay. We’ve known since the 1960s this area holds potential for oil
discoveries, and these optimistic independents believe they can bring this
prospective area into production.
Other
veteran and new independents have big exploration and development plans. We saw
expressions of interest at CERAWeek last March, and I’m confident we’ll see
evidence of that interest at the state’s North Slope areawide lease sale on
Dec. 11.
Lease
sales generate immediate revenue for Alaskans through lease sale bonus bids and
rents, and are the third-largest source of revenue generated by the Division of
Oil & Gas, after production royalties and net profit shares. Last year,
lease sales brought in over $28 million to support the General Fund, Alaska Permanent
Fund, and others.
Along
with its regular lease offerings, the State plans to offer three Special Alaska
Lease Sale Area (“SALSA”) blocks. These contiguous lease blocks represent a
unique opportunity to acquire lease rights combined with a trove of associated
well and seismic data and other information compiled by the State. The intent
is to jump-start a company’s understanding of the North Slope and thereby
accelerate drilling and development plans.
Also
in December, the Bureau of Land Management will offer leases in the NPR-A and,
for the first time ever and after decades of waiting, tracts in North America’s
most prospective onshore prospect: the coastal plain of the Arctic National
Wildlife Refuge.
Clearly, there are many reasons to be optimistic about the future of oil and gas in Alaska. New technologies, new investments and new players will add more jobs in the industry, more money in the economy and state treasury, and put more oil in the pipeline. Last winter was the North Slope’s busiest in 15 years. That trend continues.