During the next three years, Alaska's leading producer, BP Exploration, intends to rev up development of its Beaufort Sea fields off the coast of Alaska's North Slope with investment of more than $1.5 billion. Roughly $500 million will be spent in the remaining months of 1996 for a variety of development projects and exploration, with the rest scheduled for enhanced oil recovery programs, developmental drilling, bringing satellite fields onstream, and exploratory and appraisal drilling.
BP Exploration's second in command, Richard L. Oliver, outlined these plans in a speech to the Alaska Support Industry Alliance recently in Anchorage. He said the company, which shares North Slope production with Arco and Exxon, accounts for approximately 40% of the total 1.5 million b/d oil production. BP Exploration presently has interests in seven producing fields and numerous undeveloped leases.
Oliver pointed out to the Alliance that there is enormous potential for discovery and development of new reserves in the region, even excluding those that lie within the Arctic National Wildlife Refuge moratorium area, and estimated that over the coming decade at lease 5 billion bbl of new reserves will be found.
"We believe that almost all the new reserves will come from known resources, however, resources that are either in or adjacent to existing fields," Oliver said. Of these reserves, approximately 4 billion bbl would come from known sources and present fields, while the other billion bbl would result from new exploration programs and fields yet to be discovered.
Oliver said it is BP Exploration's view that the 4 billion bbl from known sources and present fields will be produced through a program of enhanced oil recovery, development drilling, and satellite field development. Projects scheduled for this year include additional field development projects at Endicott, Kuparuk, Milne Point, and Prudhoe Bay production units, and, given government and BP board approvals, at Northstar.
Northstar, encompassing about 60 sq miles, consists of five state and two federal leases. It is located in the Alaskan Beaufort Sea about four miles northwest of the Point McIntyre Field and six miles from Prudhoe Bay. Shell discovered the field in 1983, and with Amerada Hess subsequently drilled five additional appraisal wells, but it was never developed due to high costs.
In 1991, conceptual engineering indicated development costs for the Northstar complex would reach over $1.5 billion. BP Exploration acquired Shell's and Amerada's interests in the field in early 1995, and has been working to make development economic ever since. BP's current capital cost estimate is $380 million. If developed, it would be the first production on federal acreage in Alaska.
Northstar Field is estimated to contain 130 million bbl of recoverable oil. Production is expected to peak at about 50,000 b/d, making it the sixth largest among 11 North Slope fields that would be in production. BP's goal is to begin production by early 1999. Field life is estimated at 15 years.
Northstar contains a very light 42° gravity, high quality, higher-value sweet crude as compared to Prudhoe Bay oil (26°). The oil pay zone is about 260 ft thick, at a depth of about 11,000 ft. It is a high pressure reservoir, and wells will flow easily. Waterflood and gas reinjection are planned from start-up to maintain reservoir pressure and improve recovery.
Because Northstar reserves are beyond the reach of directional drilling from shore, BP proposes to develop the reservoir from Seal Island, a small gravel island in about 40 ft of water. The island would be expanded to five acres, using concrete matting for slope protection. Thirteen producing wells, six water injectors, three gas injectors, and one waste disposal well (23 total) are planned. Space for as many as 30 wells will be provided.
A single pipeline with offshore and onshore segments is the most practical option for transporting oil to shore. Once onshore, the pipeline would be routed above ground to the Trans-Alaska Pipeline System.
While Northstar will feature the first buried subsea pipeline in the Alaskan Beaufort Sea, this technology has been tested and proven in the Canadian Arctic. It will be buried well below ice scour, and most of it will be inside the barrier islands, where scouring is limited. It will also be protected by state-of-the-art corrosion and leak-detection systems.
BP has been granted an exemption from the customary state net profits tax, which, for Northstar, would have been 89%. Instead, BP will pay a supplemental royalty to the state whenever the West Coast price for North Slope oil exceeds $17.3/bbl (1996 dollars). At 20%, Northstar already has the highest royalty rate of any field on the North Slope. Under terms of the agreement, the state royalty rate would reach a cap of 27.5% when the West Coast oil price reaches $22.35/bbl (1996 dollars). The contract also contains a use-it-or-lose-it provision stating BP must fund Northstar development within a year of contract ratification or the leases revert to the state.
Canadian Beaufort Sea
East of the international boundary, the Canadian Beaufort Sea lies effectively untouched, awaiting higher prices and adventurous operators. The Geological Survey of Canada says there are large reservoirs of oil and gas in the Mackenzie Delta and Beaufort Sea, with estimated proved and probable reserves of approximately 4 billion bbl oil and 56 tcf gas.
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