Alaska North Slope crude output steady as work underway on new projects

Alaska North Slope production held steady in March at 479,867 b/d on average compared with February's average of 480,069 b/d, according to Alaska Department of Revenue production data available April 2.

Total slope output was slightly lower in March year over year against the March 2023 average of 483,671 b/d, according to the revenue department.

Three of the four major producing fields of the slope were essentially even, with February with the exception of ConocoPhillips' Alpine field, which showed a decline of 2,352 b/d om average during March. Alpine had been showing recent increases due to incremental additions with new projects.

Over previous years, however, most North Slope fields were down substantially due to the natural decline of aging producing reservoirs with the exception of the large Prudhoe Bay field, which showed increases due to intensive field redevelopment work by Hilcorp Energy, Prudhoe's part-owner and operator.

Production increases ahead

Additional production of 20,000 b/d is expected in 2025, however, with the completion of construction at Nuna, a smaller ConocoPhillips project in the Kuparuk River field. Substantially more oil is anticipated in mid-2026 when Australia-based Santos finishes the first phase of its Pikka project on the western North Slope. Pikka will add 80,000 b/d that year. Santos has about 1,100 workers employed on Pikka construction this winter.

ConocoPhillips is also busy with construction of its larger Willow project in the federally owned National Petroleum Reserve west of the Alpine field and other North Slope producing fields, which are on state of Alaska lands. About 1,800 construction workers will be busy with Willow this year, ConocoPhillips said.

Construction at Pikka and Willow are providing a welcome uptick in business for Alaska-based oil services and support companies, which have been in a slump since 2016, when crude oil prices collapsed. That was followed by the pandemic in 2020, and oil demand collapsed.

Exploration and testing of new discoveries is also underway. Apache and Colorado-based independent Armstrong Oil and Gas are drilling with three new text wells east of Prudhoe Bay. Three more tests are planned for next winter, the companies have said.

Australia-based 88 Energy has been testing its Hickory 1 discovery well in the central North Slope south of the Prudhoe Bay field and announced April 1 that a multiday production flow test showed a 70 b/d production rate of light 40-degree API gravity oil from the first of several reservoir intervals to be tested.

Other reservoir intervals in the well are also being tested. The 70 b/d result is from a 20-foot-thick reservoir internal. These rates would increase if the discovery is developed through techniques like multistage fracturing and the drilling of multiple horizontal production wells.

A similar development plan is being pursued by London-based Pantheon Resources at its discovery near the Hickory 1 well. Both finds appear small but are in locations near the existing Trans Alaska Pipeline System, which will improve their economics if 88 Energy and Pantheon move toward development. Both companies see considerable upside, they say, due to large apparent resources-in-place.

New ANWR lease sale

In the longer run, the US Department of the Interior said April 1 it would complete a Supplemental Environmental Impact Statement by midyear for a new lease sale in the Arctic National Wildlife Refuge in the far northeast of Alaska. This will be followed by a federal Record of Decision in the third quarter of the year for the leasing in the refuge.

The Interior Department gave its schedule for the two documents in a status report filed with a US federal court in Anchorage in connection with a lawsuit filed over ANWR leasing.

The new lease sale is the second ANWR lease offering required under the 2017 Tax Cut and Jobs Act, which was passed by Congress during former President Donald Trump's administration.

The first lease sale held in 2020 drew few bids mainly because of the Biden administration's opposition to ANWR exploration. A state of Alaska development corporation bid on and won seven tracts in the first sale, but the leases were later invalidated by the Interior Department due to weaknesses in the Environmental Impact Statement prepared by the Interior Department under Trump.

The new Supplemental Environmental Impact Statement being prepared will replace that, presumably establishing new more restrictive stipulations on leases sold.

The upcoming lease sale is again expected to draw light bidding, although AIDEA, the state agency, has said it will seek leases again. However, the outcome of the November presidential election is likely to affect bidding.

If Biden is reelected, he is likely to continue to oppose development in the refuge, which will depress bidding. Trump is seem as more exploration-friendly, and his election would likely encourage bids.

Even then, however, industry sources say it is unlikely that major companies like Chevron, BP and ExxonMobil, which have access to geologic knowledge in the region, will want to wade into a continued legal and political quagmire over ANWR even if leases are won and Trump is elected in November.