ConocoPhillips demobilizing North Slope drill rigs

Alaska’s largest oil producer announced this week that it will demobilize its drilling rig fleet at its North Slope fields to reduce the number of workers at risk of COVID-19.

“(ConocoPhillips) announced yesterday that due to the heightened COVID-19 risk to our North Slope workforce, we are taking action to significantly reduce the number of personnel on the Slope in a managed fashion,” said Natalie Lowman, a spokeswoman with the company.

“To do this, we are making the difficult decision to demobilize our rig fleet,” Lowman said in an email. “Given the high degree of uncertainty on how the situation plays out, we can’t say how long these measures will be in place.”

While the rigs will be placed in long-term storage, Lowman said, wells already in production will continue to produce oil.

ConocoPhillips and other oil companies in Alaska have taken unusual measures to prevent the virus from spreading at the oil fields, including extending multi-week shifts to reduce the number of replacement workers headed to the remote sites.

As of Wednesday afternoon, state health officials have confirmed the existence of only one case of COVID-19 on the North Slope. The individual works at Prudhoe Bay, run by BP.

Historically low demand during the coronavirus crisis has contributed to the plunge in oil prices, alongside an oil price war between Russia and Saudi Arabia.

The low oil prices have hit Alaska producers hard.

ConocoPhillips in March announced it would cut capital spending in Alaska by about $200 million, including by mothballing two rigs at the Alpine and Kuparuk fields.

The company informed workers and contractors on Tuesday that ConocoPhillips will now demobilize its entire rig fleet, said Lowman.

ConocoPhillips’ huge new drilling rig, nicknamed “The Beast," will not start drilling in April as originally planned, she said.

Lowman said she could not specify the number of rigs and workers that will be impacted. She also could not immediately provide details on impacts to production.

Each rig employs dozens of workers.

“Up to five rigs" will be impacted, said Ed King, a private economist in Alaska who tracks oil companies.

That does not include the “The Beast," which had not yet started drilling, he said.

The decision will at least defer some oil production for a period of time because there will be fewer wells producing oil, King said.

On the exploration side, it’s likely to delay the development of projects, King said.

The president of Doyon Drilling, which provides rigs and services to ConocoPhillips and other oil companies, said in a letter to employees on Tuesday that the decision will be “severely felt” by all Alaskans and Doyon Drilling employees.

“We understand that this volatile environment and (ConocoPhillips) directive is very concerning to our employees,” Ron Wilson wrote. “We are unable to predict how long it will take for the COVID-19 virus or the low oil prices to pass. In the meantime, we will demobilize our rigs in (a) safe and effective manner to ensure we are in position to resume drilling operations upon (ConocoPhillips') directive.”

Doyon spokeswoman Sarah Obed declined to comment.

BP, operator of the large Prudhoe Bay oil field, previously made a similar decision to lay down two drilling rigs to reduce the number of personnel working on the North Slope.

Updated: 
04/09/2020 - 11:12am