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ConocoPhillips Reports First Oil Production from North Slope Project

A subsidiary of ConocoPhillips reported first oil production from its prospect within the National Petroleum Reserve in Alaska (NPR-A) and said it was moving closer to a decision on whether to drill a second proposed project on the North Slope.

ConocoPhillips Alaska Inc. (CPAI) said its Greater Mooses Tooth No. 1 (GMT1) prospect achieved first oil production last Friday, which was ahead of schedule. GMT1 is the first drill site on federal leases within the NPR-A.

"This is another milestone for development in the NPR-A," CPAI President Joe Marushack said Tuesday. "The GMT1 team successfully and safely executed this project in an environmentally responsible manner."

CPAI began the permitting process for GMT1 in 2013, and the Interior Department's Bureau of Land Management (BLM) issued a permit to drill in October 2015. One month later, ConocoPhillips, the largest independent in the world, approved $900 million in funding for GMT1. Construction of the $725 million gross project, which includes construction and drilling expenses, started in 2017 and continued through the winter of 2018.

GMT1 includes an 11.8-acre drilling pad, a 7.6-mile road, and pipeline facilities connected to infrastructure at CPAI's Colville River Unit. The pad will have nine wells initially, with capacity for up to 33 wells. Peak gross production is estimated at 25,000-30,000 b/d, with oil produced from lands owned by Kuukpik Corp., Arctic Slope Regional Corp. and the BLM.

The subsidiary said ConocoPhillips was awaiting a record of decision (ROD) and permits for development of a second drill site at Greater Mooses Tooth No. 2 (GMT2), a more than $1 billion gross project that would be connected to GMT1 via an 8.2-mile road and an 8.6-mile pipeline.

"If the ROD is accepted and a funding decision is made, construction on GMT2 could begin in early 2019," CPAI said. "The company is also pursuing permitting for the Willow discovery in the Bear Tooth Unit, which could nominally produce 100,000 b/d gross." Peak gross production at GMT2 is estimated at 35,000-40,000 b/d.

ConocoPhillips, Alaska's largest producer, previously announced plans to begin construction of GMT2 this winter, with first oil planned in late 2021. BLM issued a final supplemental environmental impact statement (SEIS) for GMT2 last month. The project would include a 14-acre pad and up to 48 wells. Oil recovered from GMT2, like GMT1, is to be processed at ConocoPhillips' existing Alpine Central facility.

CPAI first filed permits to drill the GMT2 project in August 2015, but the project was delayed following concerns raised by the Native Village of Nuiqsut. BLM said it developed the final SEIS "with local community involvement including public meetings in several North Slope communities," including Nuiqsut. A BLM report issued in May 2017 on subsistence use areas said that Nuiqsut was the closest Native community to oil and gas activity on the North Slope.

Last July, ConocoPhillips said its Willow prospect in the NPR-A may hold up to 750 million boe, and could be rich enough to justify constructing a standalone oil hub. A final investment decision isn't expected before 2021.

If it were to move forward, ConocoPhillips' management has estimated that it could achieve first oil production from the Greater Willow area by 2024-2025 for about $2-3 billion spent for up to five years. The company then could quickly ramp up to full production, spending another $2-3 billion in cumulative drilling capital over multiple years.

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