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Vol. 23, No. 31 • www.PetroleumNews.com A weekly oil & gas newspaper based in Anchorage, Alaska Week of August 5, 2018 • $2.50

page2

Oxy taking hard look at Alaska?Crude oil price predictions upbeat

RUMORS THAT OCCIDENTALPETROLEUM is taking another look atAlaska have surfaced in the past few weeks— the latest spurred by the state’s upcomingSALSA lease sale.

Melissa Schoeb, Oxy’s vice president ofcorporate affairs, told Petroleum News July31 that as a matter of company policy shecould not comment on the rumors.

Oxy is an American multinational petroleum and naturalgas exploration and production company headquartered inHouston, Texas, that used to be involved in Alaska as aminority owner of the North Slope Milne Point oil field.

The Alaska Division of Oil and Gas is combining

Newfoundland cuts deal withEquinor, Husky, for Bay du Nord

Newfoundland has taken a major step toward a new era ofoffshore oil development in Atlantic Canada at a time whenthat region seemed destined to join other frontier plays in asteady slide into oblivion.

The provincial government announced an agreement withNorwegian-based Equinor Canada (formerly Statoil) to pro-ceed with plans to develop the deepest oil site at Bay du Nordwhere a find of 300 million to 600 million barrels was estimat-ed five years ago.

That discovery was seen as a breakthrough for the greaterbasin of Flemish Pass, 300 miles east of the Newfoundlandcapital of St. John’s, where another six fields have been iden-

ANWR 1002 scoping report out;environmental impact questioned

The federal Bureau of Land Management has published areport on the comments that the agency has received for deter-mining the scope of an environmental impact statement for aproposed oil and gas lease sale program for the coastal plainof the Arctic National Wildlife Refuge. The comments high-light concerns about the possible impacts of oil and gas indus-trial activities on the wildlife and fauna of the refuge, and onlocal communities.

The overall purpose of developing the EIS is to evaluatethe potential environmental impacts of oil and gas activities inthe ANWR coastal plain, to determine what mitigation meas-ures may be need for environmental protection or whether theproposed activities should proceed.

RCA staff reviews standards asRailbelt moves to unified system

In conjunction with moves towards a more unifiedapproach to the management and operation of the AlaskaRailbelt electrical system, during a July 11 RegulatoryCommission of Alaska public meeting commission staffreviewed a new set of Railbelt reliability standards that theutilities are in the process of implementing. The objective ofthe standards is to specify a set of technical criteria and proce-dures that minimizes the likelihood of a failure in the electri-cal system.

Critically importantA reliable electricity supply is critically important in

Alaska, especially in the winter when people depend on elec-

see INSIDER page 10

see NEWFOUNDLAND DEAL page 8

see SCOPING REPORT page 6

see RCA REVIEW page 10

Thomson questTechnically savvy ExxonMobil struggles to keep high pressure field online

By KAY CASHMANPetroleum News

The Point Thomson project, operatedby ExxonMobil, was designed to

produce 200 million cubic feet of recy-cled gas and 10,000 barrels of condensatea day. ExxonMobil continues to facetechnical challenges in the high-pressuresands of the eastern North Slope field.The company is determined to conquerthose challenges — good news for all eastern NorthSlope prospect owners that someday hope to usePoint Thomson’s pipeline to carry their oil to thetrans-Alaska oil pipeline at Pump Station No. 1.

Point Thomson output over the last six months

has ranged from approximately 5,200barrels per day of condensate to 9,100bpd, with days online varying from a lowof nine in June to a high of 31 in May.Over the six months, the field has beenonline an average of 22 days a month.

Currently, the facility is “safely shutdown … to conduct maintenance,” HansNeidig, Exxon’s public and governmentaffairs manager for Alaska, toldPetroleum News. “The advanced equip-

ment at the facility requires rigorous inspectionand maintenance protocols to ensure safe opera-tion.”

The company and its contractors “are working

Conoco earnings up2nd quarter adjusted earnings $1.3B, $418M from Alaska, 32% of total

By KRISTEN NELSONPetroleum News

ConocoPhillips reported $1.3 billionin second-quarter adjusted earnings

on July 26, compared to second-quarter2017 adjusted earnings of $178 million,the company said July 26 in reportingresults for the quarter.

For Alaska, the figures are adjustednet income of $418 million, compared to$167 million in the 2017 second quarter.

The company attributed the higher year-over-year second-quarter adjusted earnings primarily tohigher realized prices, with a total realized price of

$54.32 per barrel of oil equivalent in thesecond-quarter of this year, compared to$36.08 in the second quarter of 2017,crediting both stronger prices “and amore liquids-weighted portfolio.”

“We’ve positioned ConocoPhillips todeliver top-tier performance throughcycles by focusing on free cash flow gen-eration and following clear priorities tomaximize returns,” said Ryan Lance,chairman and chief executive officer.

“We’re benefitting from higher oil prices, but alsodriving underlying cash flow expansion,” he said.

The company’s estimated obligations to the

BP profits climbingProfit for quarter $2.8 billion; company continues to assume $50 to $65 oil prices

By ALAN BAILEYPetroleum News

In a July 31 earnings call, reporting BP’sresults for the second quarter of this

year, the company’s group chief executive,Bob Dudley, commented that BP’s under-lying global profit for the quarter had been$2.8 billion, compared with $2.6 billion inthe first quarter and $700 million a yearearlier. Dudley attributed this strong per-formance to the disciplined execution of the strategythat the company had established at the beginning of2017.

BP has said that its strategy emphasizes value overvolume and focuses on returns when making invest-

ments, while also maintaining a strongsafety record.

Growing oil demandDudley said that continuing growth in

the world economy is supporting strong oildemand growth. Economic growth is alsosupporting an increasing demand for natu-ral gas, in particular Asian demand for liq-uefied natural gas. As stocks of crude oil inthe developed world have dropped from the

excess of recent years to more normal levels, oilprices have trended higher, supported by strongdemand growth.

However, there are a number of significant uncer-

see THOMSON QUEST page 11

see CONOCO EARNINGS page 12

see BP PROFITS page 11

DARLENE GATES

RYAN LANCE

BOB DUDLEY

Ford Lake shale shows promise;Interior shale play data collected

2 PETROLEUM NEWS • WEEK OF AUGUST 5, 2018

FINANCE & ECONOMY

NATURAL GAS

PIPELINES & DOWNSTREAM

EXPLORATION & PRODUCTION

5 Exxon profit surges, just not enough

5 DOE expedites small-scale export approvals

6 DA pipeline builder wants suit dismissed

4 EIA anticipates growing energy demand

2018 International Energy Outlook sees steady increase in use of all energy types except coal, primarily in developing countries

3 Ford Lake shale oil said to show promise

Blodgett, Sutherlin collect huge amount of data on InteriorAlaska shale play that has been burning or smoldering for decades

Thomson questTech-savvy Exxon struggles to keep high pressure field online

Conoco earnings up2Q adjusted earnings $1.3B, $418M from Alaska, 32% of total

BP profits climbingProfit for quarter $2.8B; continues to assume $50 to $65 oil prices

ON THE COVER

Oil Patch Insider: Oxy taking hard look at Alaska?Crude oil price predictions upbeatNewfoundland cuts deal withEquinor, Husky, for Bay du NordANWR 1002 scoping report out;environmental impact questionedRCA staff reviews standards asRailbelt moves to unified system

To advertise in Petroleum News, contact Susan Crane

at 907.770.5592

Petroleum News Alaska’s source for oil and gas newscontents

l E X P L O R A T I O N & P R O D U C T I O N

Ford Lake shale oil said to show promiseBlodgett and Sutherlin collect huge amount of data on Interior Alaska shale play that has been burning or smoldering for decades

By KAY CASHMANPetroleum News

A laska Native regional corporation Doyon Ltd.might be sitting on a significant shale oil play on

Windfall Mountain within the Yukon-Charley RiversNational Preserve, Anchorage-based Robert Blodgettand his colleague Steve Sutherlin told Petroleum Newsin late July.

Blodgett, a geologist, and Sutherlin, a strategic oper-ative, have accumulated a large amount of paleontolog-ical and geochemical data on the area, with emphasis onthe Ford Lake shale play.

The major challenge will be getting the oil to market,as the play is downstream of Eagle, Alaska (population85), along the Yukon River, near its confluence with theTatonduk River, Sutherlin, who enjoys problem-solving,told Petroleum News. “I have a few ideas,” he said.

Stretching 1,980 miles in length the Yukon River isthe third longest watercourse of North America. The

The fire at Windfall Mountain from exposures of the Ford Lake shale has been cited on several web sites starting in 2012.see FORD LAKE SHALE page 5

PETROLEUM NEWS • WEEK OF AUGUST 5, 2018 3

Rig Owner/Rig Type Rig No. Rig Location/Activity Operator or Status

Alaska Rig StatusNorth Slope - Onshore

Doyon DrillingDreco 1250 UE 14 (SCR/TD) Milne Point, Summer Maintenance Hilcorp Dreco 1000 UE 16 (SCR/TD) Standby Dreco D2000 Uebd 19 (SCR/TD) GMTU, MT6-08 ConocoPhillipsAC Mobile 25 StandbyOIME 2000 141 (SCR/TD) Stacked 142 (SCR/TD) Kuparuk 1H-108B ConocoPhillips TSM 700 Arctic Fox #1 Stacked

Hilcorp Alaska LLC Rig No.1 Milne Point Hilcorp Alaska LLC

Kuukpik Drilling 5 Deadhorse Available

Nabors Alaska DrillingAC Coil Hybrid CDR-2 (CTD) Stacked in Deadhorse BPAC Coil CDR-3 (CTD) Kuparuk, 3H-31 ConocoPhillipsDreco 1000 UE 2-ES (SCR-TD) Stacked AvailableMid-Continental U36A 3-S Stacked AvailableOilwell 700 E 4-ES (SCR) Stacked AvailableDreco 1000 UE 7-ES (SCR/TD) Stacked ConocoPhillipsDreco 1000 UE 9-ES (SCR/TD) Stacked ConocoPhillipsOilwell 2000 Hercules 14-E (SCR) Deadhorse AvailableOilwell 2000 Hercules 16-E (SCR/TD) Stacked Brooks Range Petroleum Oilwell 2000 Canrig 1050E 27-E (SCR-TD) Stacked Glacier Oil & Gas Oilwell 2000 33-E Deadhorse AvailableAcademy AC Electric CANRIG 99AC (AC-TD) Stacked RepsolOIME 2000 245-E (SCR-ACTD) Stacked ENIAcademy AC electric CANRIG 105AC (AC-TD) Stacked in Deadhorse Doyon LtdAcademy AC electric Heli-Rig 106AC (AC-TD) Stacked Great Bear Petroleum

Nordic Calista ServicesSuperior 700 UE 1 (SCR/CTD) Prudhoe Bay AvailableSuperior 700 UE 2 (SCR/CTD) Prudhoe Bay AvailableIdeco 900 3 (SCR/TD) Prudhoe Bay AvailableRig Master 1500AC 4 (AC/TD) Oliktok Point ENI

Parker Drilling Arctic Operating Inc. NOV ADS-10SD 272 Prudhoe Bay DS 18 BPNOV ADS-10SD 273 Prudhoe Bay DSW-59 BP

North Slope - Offshore

BPTop Drive, supersized Liberty rig Inactive BP

Doyon DrillingSky top Brewster NE-12 15 (SCR/TD) Spy Island NN-01 ENI

Nabors Alaska DrillingOIME 1000 19AC (AC-TD) Cold Stacked Caelus Energy LLC

Cook Inlet Basin – Onshore

BlueCrest Alaska Operating LLCLand Rig BlueCrest Rig #1 Anchor Point, BlueCrest Alaska Operating LLC drilling production section of H14

Glacier Oil & Gas Rig 37 West McArthur River Unit Workover Glacier Oil & Gas

All American Oilfield LLCIDECO H-37 AAO 111 In All American Oilfield’s yard in Kenai, Alaska Available

Aurora Well ServicesFranks 300 Srs. Explorer III AWS 1 Stacked out west side of Cook Inlet Available

SaxonTSM-850 147 Stacked Hilcorp Alaska LLCTSM-850 169 Stacked Hilcorp Alaska LLC

Cook Inlet Basin – Offshore

Hilcorp Alaska LLCNational 110 C (TD) Platform C, Stacked Hilcorp Alaska LLC Rig 51 Steelhead Platform, Stacked Hilcorp Alaska LLC Rig 51 Monopod Platform, Drilling Hilcorp Alaska LLC Spartan Drilling Baker Marine ILC-Skidoff, jack-up Spartan 151, Stacked Seward

Furie Operating AlaskaRandolf Yost jack-up Nikiski, OSK dock Furie

Glacier Oil & GasNational 1320 35 Osprey Platform, activated Glacier Oil & Gas

Mackenzie Rig Status

Canadian Beaufort Sea

SDC Drilling Inc.SSDC CANMAR Island Rig #2 SDC Set down at Roland Bay Available

Central Mackenzie ValleyAkitaTSM-7000 37 Racked in Norman Wells, NT Available

Alaska - Mackenzie Rig ReportThe Alaska - Mackenzie Rig Report as of August 1, 2018.

Active drilling companies only listed.

TD = rigs equipped with top drive units WO = workover operations CT = coiled tubing operation SCR = electric rig

This rig report was prepared by Marti Reeve

Baker Hughes North America rotary rig counts* July 27 July 20 Year AgoUnited States 1,048 1,046 958Canada 223 211 220Gulf of Mexico 15 17 23

Highest/LowestUS/Highest 4530 December 1981US/Lowest 404 May 2016 *Issued by Baker Hughes since 1944

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By ALAN BAILEYPetroleum News

In its International Energy Outlook 2018report, the U.S. Energy Information

Administration anticipates economicgrowth in developing countries driving anincrease in global energy consumptionover the next couple of decades.

While energy consumption by countriesoutside the Organization for EconomicCooperation and Development firstexceeded consumption within the OECDin 2007, the non-OECD countries willaccount for 64 percent of world energy useby 2040, according to the EnergyOutlook’s base case. Global energy con-sumption may increase from 575quadrillion British thermal units in 2015 to739 quadrillion Btus in 2040, but withOECD consumption only increasing slight-

ly to 266 quadrillion Btus during that sametime period, the report says.

Consumption of liquid fuels, natural gasand renewables are expected to account formuch of the increased energy usage, butwith nuclear power usage also increasing.However, the EIA anticipates coal usagedeclining somewhat. The industrial use ofenergy tends to be the largest form of ener-gy consumption.

China, India and AfricaAlthough energy consumption is likely

to increase significantly in a broad spec-trum of non-OECD countries, with Asiafactoring particularly high in the overallincrease, the Energy Outlook report partic-ularly focuses on China, India and Africa.These regions have large populations andhigh levels of anticipated economicgrowth. And an examination of some of thefuture economic possibilities in theseregions illustrates the extent to whichfuture energy consumption will depend onthe trajectory of global economic growth,and on the manner in which this growthtakes place.

China, for example, may see a morerapid transition from an export-led to aconsumption-led economy than is assumedin the Energy Outlook’s base case for ener-gy consumption: That could increase theannual growth rate of the country’s grossdomestic product from 4.7 percent to 5.7percent. However, the resulting shift frommanufacturing industries towards serviceindustries would actually depress the rateof growth in energy demand. And in thepast few years China has seen a slowing ofits GDP growth rate, together with a slow-ing in the growth rate of its energy usage,

the report says.

India: high growth, low per capita consumption

Although India is forecast to have boththe world’s largest population and theworld’s fastest growing economy in thecoming decades, the country’s total energyuse and energy consumption per capita willlikely remain lower than those of Chinaand the United States. However, a transi-tion in India towards a more export-ledeconomy would cause the growth of themanufacturing sector, a factor that couldincrease forecast energy consumption by asmuch as 33 percent by 2040. Other scenar-ios that assume higher than anticipatedIndian economic growth result in similarincreases in energy consumption.

The regional economy of Africa is cur-rently dominated by the service industries— higher than expected rates of economicgrowth in the region would likely resultfrom an expanding manufacturing sector.That, in turn, could lead to a 30 percentincrease in per-capita energy consumptionin 2040, relative to AEA’s base case, theEnergy Outlook report says. l


EIA anticipates growing energy demand2018 International Energy Outlook sees steady increase in use of all energy types except coal, primarily in developing countries


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CORRECTIONSPikka, Willow API gravity

An item in the July 29 issue of Petroleum News, “Narwhal, Willow inNanushuk; investors unworried w. oil price,” confused the API gravities ofPikka/Horseshoe oil and Willow oil.

Willow oil is lighter, with an API gravity of 42 to 43, while Pikka/Horseshoeis heavier oil, with an API gravity of 30.

Petroleum News apologizes for the error.

SALSA — tract groupings, not prospectsThe Alaska Division of Oil and Gas has pointed out that wording in a story,

“Bids on blocks,” in the July 29 issue, is not accurate. The story said the state was acting as an aggregator with the SALSA, Special

Alaska Lease Sale Areas, to be offered in the fall areawide oil and gas lease salesand referred to the SALSA blocks as prospects.

No prospects have been identified on the blocks. “In reality,” the division said in an email, “we have been trying very hard to

avoid the misimpression that the state has identified and analyzed prospects oneach of these SALSA blocks. The state does not warrant or imply that each of theSALSA blocks cover identified prospects. We are simply grouping leases togetherthat are covered by publicly released tax credit seismic, and have done a lot of leg-work to point explorers to where they can collect the relevant data needed to eval-uate the acreage and decide whether to bid on it at our lease sales.”

Petroleum News apologizes for the misstatement.

Although energy consumption islikely to increase significantly in a

broad spectrum of non-OECDcountries, with Asia factoring

particularly high in the overallincrease, the Energy Outlookreport particularly focuses on

China, India and Africa.


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river’s source is in British Columbia,Canada. From there it flows throughthe Yukon with its lower half lying inAlaska where it turns north, eventuallyflowing into the Bering Sea.

The area has interested Blodgett“since the time of his M.S. thesis studyin the area (1977-1978) and his concur-rent work with Louisiana Land &Exploration Co. in the Kandik basin,”Sutherlin said.

“The formation is latest Devonian(Famennian) through earlyMississippian age and has been subjectto a number of fiery outbursts causedby lightning strikes on hydrocarbon-enriched exposures of the formation onWindfall Mountain,” the colleaguessaid in an email to Petroleum News.

The data the two have collectedaddresses the “underlying chert andshale member of the McCann Hill chert(middle-late Devonian). The McCannHill chert is similarly a deep-waterunit, which has significant red bur-nished outcrops which also were prob-ably sites of shale oil fires caused bylightning strikes. The McCann Hill islaterally equivalent to the Canol shaleof the Northwest Territories and Yukonto the east. The Canol is currently

regarded as a highly economically sig-nificant shale oil resource,” Blodgettand Sutherlin said.

The fire at Windfall Mountain fromexposures of the Ford Lake shale hasbeen cited on several web sites startingin 2012. The National Park Servicesaid the fire erupted in 2012, however,“unpublished sources I have indicatethat it has existed for a much lengthiertime on a smaller scale, including areport to me by Don Hartman (first andformer head of the Alaska Division ofGeological & Geophysical Surveys)that he and his Texaco field party hadobserved a small fire at this site in1971. In addition, it has been rumoredthat there have been undocumentedobservations of a small fire in the samegeneral locality as far back as the late1950’s,” Blodgett wrote. l

continued from page 2

FORD LAKE SHALEThe area has interested

Blodgett “since the time of hisM.S. thesis study in the area

(1977-1978) and his concurrentwork with Louisiana Land &Exploration Co. in the Kandik

basin,” Sutherlin said.

NATURAL GASDOE expedites small-scale export approvals

The U.S. Department of Energy has announced that it is speeding up theapproval process for the small-scale export of natural gas, including liquefied nat-ural gas, from U.S. export facilities to non-free trade agreement countries.

The regulatory change says that DOE will approve an application for theexport of up to 51.75 billion cubic feet of gas per year, without a public interestreview, provided that the proposed export qualifies for a categorical exclusionfrom a review under the National Environmental Policy Act.

The export of natural gas to countries that have a free trade agreement with theUnited States is already allowed, being considered to be in the public interestunder the terms of the Natural Gas Act. The new DOE rule will enable qualifyingsmall-scale exports to non-free trade countries to also be viewed as being in thepublic interest.

The new rule is primarily aimed at the gas trade with countries in theCaribbean, Central America and South America. In recent years a market hasdeveloped for the small-scale shipment of LNG to some of these countries.

“The finalization of this rule will expedite the permitting of certain small-scaleexports of natural gas,” said Secretary of Energy Rick Perry. “The so-called‘small-scale rule’ will further unleash American energy by reducing the regulatoryburden on American businesses while also providing significant benefits to ourtrading partners in the Caribbean, Central America and South America.”

—ALAN BAILEY

Exxon profit surges, just not enoughRising oil prices pushed second-quarter profit at Exxon Mobil Corp. up by 18

percent, but the results July 27 fell short of Wall Street expectations, and sharesdropped in early trading.

Exxon earned $3.95 billion in the second quarter, or 92 cents per share. Analysts were looking for $1.26 per share, according to a survey by Zacks

Investment Research. Exxon does not adjust resultsbased on one-time events such as asset sales, whichtotaled $307 million in the quarter.

Exxon is a global producer, and the price ofbenchmark international crude is up more than 50percent from a year ago.

With the higher prices, Exxon’s revenue jumped27 percent to $73.50 billion, despite a 7 percentdecline in production of oil and natural gas. The company said production in thePermian Basin of Texas and Bakken field in North Dakota rose 30 percent, butthat couldn’t offset declines in other areas.

Exxon is spending more to look for new sources of energy, however. It report-ed that capital spending — which was cut sharply during the price collapse thatstarted in 2014 — jumped 69 percent after a 36 percent increase in the first threemonths of the year. Exploration work and drilling are notably rising in Brazil, thePermian Basin and Indonesia.

Natural gas output fell 10 percent, however, partly because the company isfocusing its U.S. shale operations on producing more oil and partly due to lowerdemand for gas in Europe.

Profit margins in Exxon’s refinery business rose, with a higher number of facil-ities down for maintenance. In trading before the opening bell, shares of Irving,Texas-based Exxon were down $3.62, or 4.3 percent, to $80.61.

—ASSOCIATED PRESS

FINANCE & ECONOMY

Exxon earned $3.95billion in the secondquarter, or 92 cents

per share.

Fast-track preparationBLM has indicated that it wishes to

fast-track the EIS preparation as part of anew Department of the Interior policy tocut the time taken for EIS development.The next stage in the EIS process is thepreparation of alternative scenarios forconducting lease sales, with that stage to

be followed by an evaluation of the envi-ronmental consequences of each alterna-tive. According to a tentative schedulepresented at public meetings held duringthe scoping period, BLM hopes to publisha draft EIS this fall. Following a publicreview of the draft document, the agencyhopes to publish a final EIS in the springof 2019.

The EIS development results from aprovision within the Tax Cuts and JobsAct of 2017, requiring the Department ofthe Interior to conduct oil and gas leasesales for the ANWR coastal plain, other-

wise known as the 1002 area. The taxstatute requires at least two areawidelease sales in the 1002 area by December2024. However, the EIS may also evalu-ate post-lease activities, including seismicsurveying, drilling, exploration, develop-ment, and the transportation of oil andgas. The EIS will consider the environ-mental impacts of various leasing alterna-tives, including areas to be offered andthe stipulations that would be specifiedfor lease operations. BLM is also consid-ering potential impacts on subsistenceresources and users. The tax statute saysthat the surface footprint of any produc-tion and support infrastructure within the1.6 million-acre 1002 area must be limit-ed to 2,000 acres.

Meetings and consultationsThe EIS scoping report says that the

EIS scoping procedure included publicmeetings in four North Slope communi-ties, Anchorage, Fairbanks andWashington, D.C. BLM also issued invi-tations to 14 Native tribal entities on the

North Slope and in the Alaska Interior toparticipate in government-to-governmentconsultations. BLM subsequently heldconsultation meetings with Arctic VillageCouncil, the Native Village of VenetieTribal Government, Venetie VillageCouncil and the Native Village ofKaktovik. BLM has also agreed to con-duct consultations with the Circle VillageCouncil and the Native Village of Eagle.

BLM held scoping meetings with gov-ernment agencies involved in the EISdevelopment. Those agencies consist ofthe U.S. Fish and Wildlife Service, theEnvironmental Protection Agency, thestate of Alaska and the North SlopeBorough. Four tribal entities have alsosigned up to participate in the EIS project.

BLM is managing the ANWR leasesale program, while Fish and Wildlifemanages the ANWR surface environ-ment. Both agencies are within theDepartment of the Interior.

Thousands of commentsIn addition to feedback received

through public meetings and tribal con-sultation, BLM received written state-ments that contained a total of 4,546 sub-stantive comments, the scoping reportsays. The majority of the comments camefrom individual people rather than organ-izations or government entities.Comments covered a wide range of top-ics, including the potential impacts of oiland gas activities on various componentsof the natural environment, socioeconom-ic concerns, the uses of natural resourcesin the 1002 area, and the EIS processitself.

In terms of the EIS process, some com-menters questioned whether the stream-lined timetable for the EIS developmentand a planned limit to the size of the EISdocument would result in hasty decisionmaking and the hindrance of adequatepublic involvement. And some peoplerequested an extension to the public com-ment period for the scoping process.

Some commenters asked that BLMconsider a wide range of alternatives,including a “no action” alternative, for theANWR lease sale proposal.

Some people commented that oil andgas project impacts, including possible oilspills, would likely extend beyond theallowed 2,000-acre surface footprint fordevelopment. And some asked for greaterclarity in how the 2,000-acre disturbancelimit would be defined. Some said that theEIS must consider the cumulative impactsof oil and gas activities, taking intoaccount activities elsewhere on the NorthSlope and in neighboring areas ofCanada.

Questions over the impact of ANWRoil production on climate change werealso raised.


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SCOPING REPORT

see SCOPING REPORT page 9

l P I P E L I N E S & D O W N S T R E A M

DA pipeline builder wants suit dismissedTHE ASSOCIATED PRESS

The company that built the Dakota Access oil pipelinewants a North Dakota judge to throw out a lawsuit

over its ownership of agricultural land, claiming it’s not vio-lating a Depression-era state ban on corporate farming thatit calls unconstitutional anyway.

Attorneys for Dakota Access LLC also asked the judgein court documents filed July 24 to prevent North DakotaAttorney General Wayne Stenehjem from enforcing thestate’s anti-corporate farming law. It prohibits large corpo-rations from owning and operating farms in order to protectthe state’s family farming heritage.

Stenehjem’s office filed a civil complaint July 3 alleging

that the pipeline company’s continued ownership of ranchland it bought in September 2016 violates the law. He wantsthe court to fine the company $25,000 and order it to sell theland within a year or face more fines.

Dakota Access LLC was formed by Texas-based EnergyTransfer Partners to build the $3.8 billion pipeline to moveNorth Dakota oil through South Dakota and Iowa to a ship-ping point in Illinois. The company bought 12 square milesof ranchland in an area of southern North Dakota wherethousands of pipeline opponents gathered to protest in 2016and 2017. It cited the need to protect workers and help lawofficers monitoring the protests.

Stenehjem deemed the purchase temporarily necessaryto provide a safer environment and reached a deal with the

company under which he agreed not to immediately sue.The agreement expired at the end of June, and he sued. Hedeclined comment July 25 on the company’s formalresponse.

Dakota Access attorney Lawrence Bender argues thatthe company’s ownership of the land falls within an excep-tion within the anti-corporate farming law that allows forcompanies to own farmland if it’s necessary for an industri-al project. He also said the land continues to be used foragriculture.

Bender also maintains North Dakota’s anti-corporatefarming law violates several clauses of the U.S.Constitution, including one that bars infringements on inter-state commerce. l


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tified.Bay du Nord, which followed earlier

discoveries labeled Mizzen and Harpoon,is now scheduled for sanctioning in 2020,with first oil expected in 2025.

First project negotiatedIt is the first project to be negotiated

under Newfoundland’s generic oil royaltyregulations, which are part of the govern-ment’s Advance 2030 — The WayForward on Oil and Gas, which it hopeswill position the province as a globally pre-ferred location for oil and gas develop-ment.

Newfoundland Premier Dwight Ballsaid the commitment and investment of thepartnership of Equinor as operator andHusky Energy “highlights the attractive-ness of our industry and the potential thatexists within this province in our offshore.”

He said the advance of Bay du Nordwill allow Newfoundland to “take our firststep into the new frontier, we mark a newera of deep-water exploration as well as theopening of a new basin — the FlemishPass. The future of our offshore begins

today.” Charlene Johnson, Chief Executive

Officer of the Newfoundland OffshoreIndustries Association, predicted that byearly 2020 there could be as many as fivedrilling platforms operating in the region.

“This place is going to be on wheelsfrom 2020 to 2025,” she said. “Let’s hopeit’s oil that they find.”

Until now, Newfoundland has reliedsolely on the Jeanne d’Arc Basin for oiloutput from the Hibernia, Terra Nova,White Rose and since last year Hebron-Ben Nevis, which is pumping at 150,000barrels per day.

The prospective benefits listed for Baydu Nord include a capital layout of C$6.8billion, more than C$14 billion in econom-ic activity (in 2017 dollars), about 11,000

person years of employment for theprovince alone, C$3.5 billion in govern-ment revenues, in-province fabrication of5,000 metric tons for a floating productionstorage and offloading, FPSO, unit and aminimum C$75 million in research anddevelopment, and education and trainingexpenditures over 10 years to help positionNewfoundland as a “deep-water center ofexcellence.”

Target 650,000 bpdWhile the rest of Canada has become

bogged down in feuding over oil sandsexpansion and the challenge of buildingpipelines to the United States and exportterminals in British Columbia, Quebec andNew Brunswick, Newfoundland hasescaped the spotlight while quietly pushingtowards its target of drilling more than 100new exploration wells and tapping intomultiple basins to produce more than650,000 barrels per day from new andexisting projects.

The province’s Oil and Gas IndustryDevelopment Council is providing thegovernment with 17 focus areas rangingfrom short- to long-term.

The council estimates there are morethan 37 billion barrels to be drilled off thecoast of Newfoundland, of which only 7

percent is covered by licensed drillingoperations, and 133 trillion cubic feet ofgas potential, which is targeted for com-mercial production in 2030.

To open up that resource, the provinceaims to reduce the development time foroffshore projects to seven years — a planBall has called “ambitious, but achiev-able.”

Despite the Canadian government’sdetermination to impose a nation-wide car-bon tax and the growing trend towardsgreen energy, Ball said there is no reason topull back from oil projects at time whenthere is “still a thirst for oil and gasthroughout the world.”

He has committed Newfoundland tolaying a foundation for an industry that“will be in full swing within 12 years.”

“We already know there are tremendousreserves (within the province’s territorialwaters). If we do not put targets in placeand the mechanism to get there ... and chal-lenge people it will never get done,” Ballsaid.

Asked to reconcile the additional green-house gas emissions that will be generatedby Bay du Nord and other ventures, he saidNewfoundland produces fewer carbonunits per barrel of oil than the global aver-age, adding that an informed decision oncarbon pricing has yet to be reached inCanada.

“If you’re going to use oil, I can tell you(Newfoundland) is the greenest place to getthat oil,” Ball declared.

Natural Resources Minister SiobhanCoady expressed the hope that develop-ment of Bay du Nord will attract furtherinvestment in other unexplored deep-waterbasins.

UN agreementAn unresolved question hanging over

Bay du Nord is the impact of an agreementsigned by Canada in 2003 under the UnitedNations Convention on the Law of the Sea,requiring countries to make payments to aUN body called the International SeabedAuthority for the exploitation of non-livingresources (such as oil) on the continentalshelf beyond Canada’s 200-mile limit.

To date those payments have never beenenforced anywhere in the world, but Ball isadamant that the Canadian government andnot his province must shoulder the burdenof payments to the UN.

“This is an agreement (the federal gov-ernment) has entered into and this will betheir responsibility,” he told the CanadianBroadcasting Corp. “I would not expectany national government to back out of anagreement it has made to the UnitedNations.”

Any payments due to the UN will notstart until five years after production startsand would progressively ramp up afterthat, topping out at 7 percent of productionvalue.

The government of Prime MinisterJustin Trudeau made no comment on whoshould make the payments, but notes pre-pared in 2004 by then federal naturalresources minister John Efford pointed to alooming federal-provincial showdown bywarning “this issue bears significantimpacts” for both levels of government.

Currently, the Canadian governmentcollects offshore oil royalties and transfer100 percent of those to Newfoundland,while both governments collect tax rev-enues linked to offshore resource extrac-tion.

Federal briefing notes to 2016 said theminister of reign affairs “is responsible forpayments to international organizations,”but added that the “source for paymentshas not been identified.”

—GARY PARK


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NEWFOUNDLAND DEALThe council estimates there are

more than 37 billion barrels to bedrilled off the coast of

Newfoundland, of which only 7percent is covered by licenseddrilling operations, and 133

trillion cubic feet of gas potential,which is targeted for commercial

production in 2030.


Oil Patch Bits

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Companies involved in Alaska’s oil and gas industry

All of the companies listed above advertise on a regular basis with Petroleum News

Stork awarded contract renewal by Ecopetrol Fluor Corp. announced July 26 that

Stork, part of Fluor’s diversified servic-es segment, was awarded a five-yearcontract renewal by Ecopetrol S.A. tooperate and maintain its surface facil-ities on the Cusiana and Cupiaguagas fields in Colombia. These facilitiesprocess 30 percent of the Colombianindustrial and domestic gas consump-tion. Fluor booked the undisclosedcontract value in the second quarterof 2018.

Stork will provide integrated oper-ations and maintenance services to the gas compression facilities and the power genera-tion systems until 2023. In addition, Stork will plan and execute the overhauls of theEcopetrol turbomachinery and related equipment during this timeframe.

“We are pleased that Ecopetrol has extended Stork’s contract to continue work inCusiana and Cupiagua. We have been supporting these gas fields since 2013, and this con-tract renewal demonstrates the valuable partnership we have established with Ecopetrol,”said Taco de Haan, Stork’s president. “Under this contract, Stork will continue to drive fieldefficiency improvements and will use new techniques to further assist Ecopetrol toimprove the overall equipment effectiveness.”

Lynden gets it done for North Slope customerLynden International said July 20 that its Anchorage crew has coordinated many char-

ters, but rarely do they involve one of the world’s largest commercial cargo aircraft, theAntonov 124. “When one of our customers ‘rings the bell’ and needs an 82,000-pound,60-foot-long, 11-foot-high mud pump house for their North Slope exploration project, guyslike Jeff Pennell, regional operations manager with Lynden International, answer the call,”said Senior Account Executive Nick Karnos.

In his 32 years at Lynden, Pennell says there have only been a handful of times he had

to hire an aircraft this big to haulfreight. “It’s no big deal to make thistype of move happen,” he said mod-estly. “This is no different than any ofthe other charters we set up, thefreight and the airplane are just a lit-tle bigger.”

But, in fact, the move was a bigdeal. The customer was losing almosta million dollars a day waiting for the emergency freight with a crew and drill rig standingby. It required finding the specialized aircraft, coordinating the movement of freight fromthe shipper in Houston to the airport, loading equipment on the ground, ground handlingand the subsequent movement from Fairbanks to Alaska’s North Slope. Pennell relied onthe expertise of Steve Willford, project manager with Alaska West Express in Fairbanks forspecialty equipment and handling. Once the freight arrived in Fairbanks, it was unloaded,trans-loaded to a separate trailer, then sent 400 more miles to Deadhorse. FromDeadhorse, it went over an ice road to an island in the Arctic Ocean where crews werewaiting.

Nabors announces second quarter 2018 conference callNabors Industries Ltd. invites you to join Anthony G. Petrello, chairman and CEO, and

William Restrepo, CFO, Aug. 1 at 10 a.m. Central Time for a discussion of operating resultsfor the second quarter ended June 30. Nabors will release earnings after the market closeson July 31.

Please call 10 to 15 minutes ahead of time to ensure proper connection. The conferencecall will be recorded and available for replay for one week, by 1 p.m. Central Time on Aug.1. To hear the recording, please call 877-344-7529 domestically or 412-317-0088 interna-tionally and enter participant elite entry number: 9124694.

Nabors will have a live audio webcast of the conference call available on its website atwww.nabors.com. Navigate to the investor relations page and then select events calendarto join the webcast. An electronic version of the earnings release and supplemental pres-entation will also be available to download from the website.

AAfognak Leasing LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6Air LiquideAlaska Energy Services, LLCAlaska DreamsAlaska Frac Consulting LLCAlaska Frontier Constructors (AFC)Alaska Marine LinesAlaska MaterialsAlaska RailroadAlaska Rubber & Rigging Supply Inc.Alaska Steel Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4Alaska Textiles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4Alaska West ExpressAlpha Seismic CompressorsAmerican Marine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11Arctic Catering & Support ServicesArctic ControlsArctic Fox EnvironmentalArctic Wire Rope & SupplyARCTOS Alaska, Division of NORTECH . . . . . . . . . . . . . . . . .10Armstrong . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3ASRC Energy ServicesAT&T . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7Avalon DevelopmentAviator Hotel

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Colville Inc.Computing Alternatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5CONAM ConstructionCruz Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10Dowland-Bach Corp.Doyon AnvilDoyon AssociatedDoyon DrillingDoyon, Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5exp Energy ServicesF. R. Bell & Associates, Inc.FairweatherFlowline AlaskaFluorFoss MaritimeFugro

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Mapmakers of AlaskaMAPPA TestlabMaritime Helicopters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2Motion & Flow Control Products

N-PNabors Alaska Drilling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8Nalco ChampionNANA WorleyParsonsNature Conservancy, TheNEI Fluid TechnologyNordic CalistaNorth Slope Telecom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11Northern Air CargoNRC Alaska . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5Opti StaffingPENCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11Petro Star LubricantsPetroleum Equipment & Services, Inc.PRA (Petrotechnical Resources of Alaska)Price Gregory International

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Concerns about caribouOne area of contention, particularly for the Gwich’in

people of the Alaska Interior and northern Canada, is thepossibility of oil and gas development having adverseimpacts on the Porcupine caribou herd that uses theANWR coastal plain as an area for calving during thesummer. Commenters requested that BLM fully analyzethe ways in which the proposed leasing program mayimpact caribou calving, insect relief habitat and migrationroutes. A long list of questions over potential caribou

impacts included requests for analyses of habitat use, con-cerns about the possible displacement of caribou fromtheir normal habitats, and concerns about the possibleimpact of oil developments on the vegetation that cariboucalves feed on.

Other questions were raised about numerous otherenvironmental issues, including potential impacts onmigratory birds, on special status species such as polarbears, and on other marine wildlife. People made com-ments on the need to avoid noise disturbance to wildlifeand to prohibit the refueling of aircraft, including helicop-ters, near bodies of water.

Some questioned how the lease sale program proposalcould be reconciled with a Fish and Wildlife Service rec-

ommendation in 2015, in conjunction with the agency’sANWR conservation plan, that the coastal plain of therefuge should be designated as wilderness.

Other issues include access to land for local residentsfor subsistence hunting and fishing. And some peoplequestioned whether the benefits of local jobs resultingfrom oil and gas activities would be sufficient to compen-sate for the negative impacts on local communities,including impacts on tourism and the local Nativeeconomies.

—ALAN BAILEY


SCOPING REPORT

tricity for lighting and for powering theheating systems in buildings.

Until recently the Railbelt electricitygrid has operated under two similar butdifferent reliability standards. The com-mission is concerned that there needs to

be a single, consistent set of standardsthat is enforced for all six of the utilitiesthat operate the Railbelt electrical system.The utilities have worked together tomerge the two existing sets of standardsand they filed a unified set of standards inApril. The utilities are also looking toimplement an organization called theRailbelt Reliability Council, which,among other things, would enforce the

use of the standards.

Perform to specificationJay Layne, an RCA staff engineer,

characterized electrical reliability as theability of the system to perform close toits specifications, including, for example,the maintenance of an alternating currentfrequency near 60 hertz. The electricityalso needs to be delivered within requiredvoltage specifications. In addition toensuring the continuity of the electricalsupply itself, a key challenge is to meetthose frequency and voltage parametersin a situation where the electrical load iscontinuously varying, and where an elec-tricity generator may break down or gooffline. A particular nightmare is the typeof cascading blackout that could occur ifthere is a loss of generation capacity with-out an adequate, compensating sheddingof electrical load.

Another reliability issue that has beenemerging in recent years is the possibilityof a physical or cyber attack on the elec-trical system.

The reliability standards need to

address the means of ensuring that theelectricity meets the required technicalstandards, while also ensuring that thereare appropriate procedures for handlingsupply emergencies. Personnel need to beappropriately trained and qualified, andfacilities appropriately maintained.

NERC standardsThe huge interconnected electricity

grid in the Lower 48 has federally man-dated standards overseen by the NorthAmerican Electric Reliability Corp., orNERC. The isolated Alaska Railbelt doesnot have to conform to the NERC stan-dards but has standards, many of whichare modeled on those of NERC. Each util-ity in the Railbelt has its own electricityload balancing area but also interchangespower with other utilities within what is asingle system, interconnected through theRailbelt transmission grid. The intercon-nected nature of the system means that aproblem encountered by one utility canimpact other utilities on the grid, Laynecommented.

Eight categoriesThe Railbelt standards are grouped

into eight categories, including the bal-ancing of power generation and electricalload; the design of facilities; facility con-nection standards; the interchange ofpower between different load balancingareas; protection against load shedding;the maintenance of reserve power; andtransmission planning.

The Railbelt standards do not currentlyencompass physical and cybersecurity —as previously reported in PetroleumNews, the utilities have established aworking group to address this issue andanticipate filing a draft set of cybersecuri-ty standards by the end of this year.

As part of his response to the July 11presentation, Commissioner RobertPickett commented that another issue thatneeds to be addressed is the question ofhow the standards will be maintained.What entity will conduct ongoing over-sight of the standards, and what would bethe RCA’s role in the regulatory enforce-ment of the standards and changes to thestandards?

—ALAN BAILEY


COMPANIES

37 yearsBUILDING ALASKAF O R M O R E T H A N

Experts in Resource Development and Heavy Civil Construction

Cruz Construction | Alaska Interstate Construction

Cruz Energy Services | Cruz MarineA CIRI Company A CIRI Company

unleased acreage backed by a multitudeof information on those leases to offerthree blocks of leases in Special AlaskaLease Sale Areas to be held concurrentlywith its fall oil and gas lease sale.

One of the large, contiguous acreageSALSA blocks is 23,040 acres atGwydyr Bay on the central North Slopecoast between Milne Point and Northstarnorth of Prudhoe Bay (see July 29 articlein Petroleum News titled “Bids onBlocks”).

There are six wells in the GwydyrBay SALSA block, including Northstar3, Long Island 1, Gwydyr Bay wellseither drilled in or with bottom holes inthe block, and the Sak River 1A whichhas a bottom hole in the block.

Each of the SALSA lease blocks has3-D seismic available; data which wasacquired through the state’s tax creditprogram and is available through theAlaska Department of Natural Resourcesfor a modest fee, the division said.

Unless a separate deal is announcedearlier, Oxy’s level of interest in Alaskashould be revealed at that time.

World supply risks bolster oil prices

IN EARLY JULY ANALYSTS ATSANFORD C. BERNSTEIN & CO.warned crude could rise past $150 a bar-rel on chronic capital underinvestment.

This prediction was followed by aflurry of liquidations by hedge funds andother money managers profiting on theirbullish positions in crude futures ratherthan concern that a downturn was ahead.

But very real-world supply risks onceagain took hold July 30 to boost AlaskaNorth Slope crude $1.12 to $76.40 a bar-rel, West Texas Intermediate oil $1.44 to$70.13, and Brent crude 68 cents to$74.07.

The reaction was instigated bySyncrude Canada’s oil sands facility nearFort McMurray, Alberta, not returning tofull production as soon as expected butlonger term and more worrisome supplyconcerns include ongoing declines inVenezuela, fluctuating production inLibya and Nigeria, the loss of Iranian oildue to U.S. sanctions and an emergingU.S.-China trade war.

Other analysts have recently con-curred that a shortfall in supply is possi-ble and could result in a super-rise inprices, potentially much larger than the

$150 a barrel spike that occurred in2008.

That said, they also indicate theincrease to $150 a barrel or above won’tbe smooth or fast. There are still bumpsin the road, such as on July 31 theAmerican Petroleum Institute reported acrude oil inventory build of 5.59 millionbarrels in U.S. inventories for the weekending July 28, compared to analystexpectations that the week would see adraw in crude oil inventories of 2.794million barrels.

Walker gets poor grade for Alaska

ALASKA GOV. BILL WALKER, ANINDEPENDENT, says the budget deal herecently signed into law will help Alaskarecover from its current economic woes.

The budget legislation creates a for-mula to allow the state to continue tap-ping into Permanent Fund earnings, plusit provides more than $30 million forpublic safety next year, and $50 millionin new school funding over the next twoyears.

Walker called his budget and therestructuring of the Permanent Fund “thebiggest steps Alaska has taken in the lastfive years to turn the corner toward a

stable future.”But not all Alaskan agree, including

business people across the state whobenefit from citizens spending theirannual dividends; not to mention themen, women and children whose divi-dends have already been cut by the gov-ernor and his supporters (dropping thisyear’s dividend to $1,600 from the origi-nal estimate of $2,700).

Seeking a second term in November,Walker faces Republican and Democratopponents that intend to make the divi-dend cuts a central issue in their cam-paigns.

Alaska under the Walker administra-tion has recently been relegated to thebottom of CNBC’s Top States forBusiness rankings while fellow oil pro-ducing state Texas has taken the No. 1position, despite also having to deal withlower oil prices since 2014.

According to CNBC, it scores all 50states on more than 60 measures of com-petitiveness, developed with input from abroad and diverse array of business andpolicy experts, and official governmentsources.

—KAY CASHMAN


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Nanushuk – A Slice from the Heartof the Watermelon

FOR SALE or FARMOUT: All terms negotiable. South Nanushuk Prospect. 35,423 acres. East to west – 18linear miles covering multiple Nanushuk clinothems. Theprospect covers 3 linear miles north to south. Immediatelynorth of 1 billion-plus barrels-of-oil-in place Umiat Oil Field– a Nanushuk oil reservoir. The geological thesis for theSouth Nanushuk Prospect is that the Umiat oil is a tell-taleindicator of significantly larger Nanushuk oil depositsdeeper and to the north of Umiat Mountain. Armstrong’sdiscoveries located north of the South Nanushuk Prospect(i.e., Pikka and Horseshoe) have reified our Nanushukprospect thesis. The South Nanushuk Prospect is south ofthe 1.2 billion barrel (proved contingent reserves) PikkaUnit and 20+ miles south of Armstrong’s Horseshoe wildcatwell. USGS geophysical data confirm continuity of theNanushuk and Torok formations through the SouthNanushuk Prospect leases (BLM; NPR-A). Each of theNanushuk clinothems arcing through the South NanushukProspect begin south of the Umiat Oil Field and extendnorth through the Pikka Unit.

For access to the data room: www.nanushuk.com. Or contact:

PAUL L. CRAIG, Ph.D. President Trading Bay Oil & Gas, LLC.

[email protected]

diligently to complete the maintenanceand resume production as soon as pos-sible. Our highest priority is the safetyof our workers and the environment,”Neidig said. “Production will onlyresume when it is safe to do so. Wecannot speculate on exact timing.”

Because of “the equipment’s uniquenature, more time is needed to replacesome components compared with stan-dard, off-the-shelf equipment,” he said.

Neidig was likely referring to thetwo industry-first compressors that arekey in producing condensate and recy-cling gas in the field.

In a Point Thomson plan of develop-ment submitted to the state a little overa year ago, Exxon said, “production todate has been impacted by gas injectioncompressor availability and reliabili-ty,” referring to the compressors as“industry-first,” which likely explainsPetroleum News sources saying thecompressor serial numbers were 001and 002.

Pressure in the field is nothing toscoff at. Development of the PointThomson field requires handling reser-voir pressures upwards of 10,000pounds per square inch, a pressure cor-responding to “the effect of an elephantstanding on the end of someone’sthumb,” former production managerCory Quarles said in mid-May 2016.

The reservoir pressure is the “high-est in ExxonMobil’s global portfolio,and probably the highest of any pro-ducing field in the world,” Quarlessaid.

The 10,000 psi is still used by thecompany in 2018.

A state official who asked not to beidentified told Petroleum News July31: “Point Thomson would be toughfor any other major to deal with, butExxon keeps whittling away at theproblem. We’re fortunate they’re oper-ating that field. I doubt it would everhave been developed otherwise,” hesaid, citing “Exxon’s deep pockets andtechnical savvy.”

The latest Point Thomson produc-tion manager is Darlene Gates, whowas brought on from Imperial Oil afew months ago — likely because ofher technical expertise and success atImperial’s mega-oil project in north-eastern Alberta.

Exxon holds a 69.6 percent interestin Imperial. l

Note: Mug shot of Darlene Gateswas taken from a larger photo of Gatesand Lakeland Catholic School DistrictSuperintendent Joe Arruda from whomshe accepted an award on behalf ofImperial, a reflection on her involve-ment in district educational programsof Cold Lake, Alberta.

See full story and sidebar in theApril 18 edition of Petroleum News.


THOMSON QUESTtainties, including oil supply disruptions incountries such as Venezuela and Libya;questions over future U.S. sanctions onIranian oil exports; and U.S oil infrastruc-ture bottlenecks, particularly relating to thetransportation of oil from the Permian basinin the Lower 48. Given these uncertainties,BP continues to plan on an oil price in therange $50 to $65 per barrel, Dudley said.

Purchase of BHP assetsIn the context of high-grading the com-

pany’s upstream portfolio, Dudley talkedabout BP’s takeover of all of BHP’s U.S.onshore assets in a deal that was announcedon July 27. The deal will give BP access tothe liquids-rich Permian-Delaware basin,and to the Eagle Ford and Haynesvillebasins, adding high quality assets and morethan 4.6 billion barrels of oil equivalentresources to the company’s Lower 48 port-folio, Dudley said.

Dudley said that BP anticipates offset-ting some of the cost of the BHP assetsthrough the sale of $5 billion to $6 billionin assets, predominantly from BP’supstream business. BHP has previouslyannounced that it was selling its Lower 48assets to BP for $10.5 billion.

In the long term, BP anticipates thesenewly acquired unconventional oil and gasassets becoming an important addition tothe company’s options for growth: Theassets are expected to add $1 billion to thecompany’s upstream pre-tax cash flow by2021, Dudley said.

The Kuparuk swapDudley also cited BP’s recently

announced swap with ConocoPhillips ofBP’s interests in the Kuparuk River field onthe North Slope for an increased BP inter-est in the Clair field in the North Sea asanother example of the company followingits strategy of high grading its portfolio.The concept is to deepen the company’sportfolio in core areas while creating valueby divesting assets to other companies,Dudley said.

Dudley also commented on the imple-mentation of the company’s APEX systemon more than 1,000 wells that the companyoperates in Alaska. The APEX digital tech-nology, using sensors and data compila-tion, enables the company to optimize pro-duction through live monitoring and mod-eling of what is happening. During theearnings call question and answer session,Dudley commented that the use of this typeof technology is evolving much faster thanthe company had expected and is produc-ing astounding results through the ability tospeed up decision making.

Global LNGAsked about whether BP has a suffi-

ciently large presence in the global LNGtrade, Dudley responded that, given thecompany’s LNG projects in various partsof the world coupled with several LNG off-take agreements, the company is currentlytrading a lot of LNG. He commented on theAlaska LNG project, which, he said, hasbeen talked about for years.

“We’ll see about that but it’s not a burn-ing desire in the portfolio,” he said.

In May BP signed a precedent agree-ment for the sale of Prudhoe Bay gas to theAlaska LNG project.

In terms of BP’s strategy for address-ing concerns about carbon emissions andthe transition towards a low carbonfuture, Dudley reiterated his company’sstrategy, announced earlier this year.That strategy involves reducing emis-sions from the company’s own opera-tions, improving the company’s productsin ways that can reduce carbon emis-sions, and creating new low-carbon andrenewable energy businesses. l


BP PROFITSThe APEX digital technology,

using sensors and datacompilation, enables the company

to optimize production throughlive monitoring and modeling of

what is happening.

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state of Alaska in the form of taxes and royalties totaled$291 million in the second quarter, ConocoPhillipsAlaska spokeswoman Natalie Lowman told PetroleumNews in an email.

She said that in the second quarter the companyinvested $581 million in Alaska, bringing the company’syear-to-date total to $844 million.

“That capital spend of $581 million represents about29 percent of the total $2 billion capital spend forConocoPhillips overall,” Lowman said.

Second quarter production in Alaska was 185,000barrels of oil equivalent a day, almost flat compared tothe 2017 second quarter, she said.

Second quarterExcluding Libya, ConocoPhillips’ production for the

second quarter was 1.211 million boe per day, a decreaseof 214,000 from a year ago. The company said the vol-ume impact from closed dispositions in 2017 was272,000 boe per day.

“Excluding the impact of closed dispositions, under-lying production increased” 58,000 boe per day, or 5 per-cent, ConocoPhillips said, with the increase primarilyfrom its “Big 3” Lower 48 unconventional assets —Eagle Ford, the Bakken and the Delaware (part of thePermian) basin — and other major projects, “whichmore than offset normal field decline.”

Production from the company’s Lower 48 unconven-tional assets grew 37 percent year-over-year.

For the first six months of the year, production,excluding Libya, was 1.216 million boe per day, com-pared with 1.503 million for the same period in 2017,with an impact of 337,000 boe per day from six monthsof closed dispositions. Excluding that impact, underlyingproduction increased 50,000 boe per day, 4 percent. “Theincrease was largely driven by new production frommajor projects, development programs and improvedwell performance, more than offsetting normal fielddecline,” the company said.

Full year production guidance has been increased to arange of 1.225 million to 1.255 million boe per day,reflecting “the higher-than-budgeted partner-operated

activity, improved performance across several operatingareas and completion of the Alaska Western North Slopebolt-on acquisition,” ConocoPhillips said, with third-quarter production expected to be 1.215 million to 1.255million boe per day, reflecting typical seasonal turn-arounds and maintenance activity. The company said allproduction guidance excludes Libya.

Alaska“In Alaska, GMT-1 drilling continued, and the project

is on track to deliver first oil in the fourth quarter of2018,” ConocoPhillips said.

ConocoPhillips closed on its previously announcedAlaska bolt-on acquisition on the Western North Slope inthe quarter — the acquisition from Anadarko Petroleumof that company’s share of Alpine and Western NorthSlope acreage, including Greater Mooses Tooth andWillow — and announced that it has agreed to acquire a39.2 percent interest in the Greater Kuparuk Area fromBP, while selling BP a subsidiary that will hold a 16.5percent interest in the UK Clair field. That exchange issubject to regulatory approval.

Also in the quarter the company announced positiveresults from its 2018 six-well exploration and appraisaldrilling program in Alaska.

Al Hirshberg, ConocoPhillips executive vice presi-dent, Production, Drilling & Projects, told analysts July26 that second quarter production, excluding Libya,averaged 1.211 million boe per day, just above the highend of second-quarter guidance, driven primarily by out-performance in Eagle Ford and Bakken, but also reflect-ing an additional 5,000 barrels per day from the compa-ny’s Western North Slope acquisition.

Lower 48Hirshberg said the company’s Big 3 Lower 48 uncon-

ventionals averaged 292,000 boe per day in the secondquarter, 37 percent growth year-over-year. (Alaska aver-aged 185,000 boe per day, basically flat year-over-year).Eagle Ford averaged 182,000, Bakken 82,000 and theDelaware 28,000.

He said the company has adjusted its 2018 operatingplan to reflect higher production and higher prices, com-pared to the company’s reference price of $50 WestTexas Intermediate when 2018 budgets were planned.An increase of roughly 10 percent in capital for 2018, to

$6 billion, is driven by three factors, all Lower 48 —increased partner-operated activity, increased operatedasset efficiency resulting in more completions with thesame number of rigs and inflation. Hirshberg saidConocoPhillips is moving one unconventional Delawarerig to the Eagle Ford and laying down the company’s oneconventional rig in the Permian. He said the company’soriginal plan for unconventional drilling called for sixrigs in the Eagle Ford, three in the Delaware and two inthe Bakken, so the total in the company’s unconventionalareas remains 11.

Alaska futureHirshberg said no production from the purchase of

BP’s interest in Greater Kuparuk was included in the2018 numbers, since that deal is awaiting regulatoryapproval. Those volumes, for a full year, would be aboutplus 30,000 barrels, he said.

The West North Slope position purchased fromAnadarko has closed, he said, with regulatory approvalin May, so those volumes are included in year-end num-bers, about 7,000 barrels.

Discussing inflation pressure, Hirshberg said the steeltariffs in the U.S. are turning out to be a fairly significantitem for ConocoPhillips, since the company spends, inthe Lower 48 and Alaska, some $300 million a year onsteel, including pipes, valves and fittings.

He said hot-rolled steel prices in the U.S. are up some26 percent since the first of the year, althoughConocoPhillips has been somewhat isolated from thatincrease by its supply chain position — but he said thatcost would continue to grow next year.

On capex, Hirshberg said they anticipated a finalinvestment decision on Willow in 2021, and that’s whensignificant spending would start on that development.

As for acquisitions, Hirshberg said the Western NorthSlope and Kuparuk were “very special opportunities”where ConocoPhillips had partners who viewed valuesdifferently than ConocoPhillips.

He said if more deals like those two present them-selves, the company would take them, but he said thecompany’s experience has been that those deals are fewand far between. l


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