ConocoPhillips to resume drilling in December

  • ConocoPhillips Alaska President Joe Marushack speaks at the Anchorage Economic Development Corp. luncheon on Jan. 31, 2018. He announced on Nov. 18 that the company would be restarting its North Slope drilling program in December after pausing activity in April due to oil price and pandemic issues. (Photo/Michael Dinneen/For the Journal)

ConocoPhillips Alaska leaders announced Wednesday that they will soon get back to what largely makes an oil company an oil company: drilling for oil.

Joe Marushack, president of ConocoPhillips Alaska said the company plans to resume drilling at its productive CD-5 North Slope drill site before the end of the year. It would mark the first development drilling for the largest oil producer in the state since April when ConocoPhillips suspended its entire North Slope drilling program in response to extremely low oil prices at the time.

The price for Alaska North Slope crude averaged $16.55 per barrel in April, according to the state Revenue Department. Oil prices have rebounded since and are generally stable in the $40 per barrel range .

Marushack, who spoke during a virtual edition of the Resource Development Council for Alaska’s annual fall conference, said oil prices still need to increase further and the company believes they will but the fact that Alaska voters rejected Ballot Measure 1, a citizen-led initiative to significantly increase oil production taxes on the Nov. 3 ballot was a prominent factor in the decision to resume paused work.

ConocoPhillips Alaska representatives previously said the company wouldn’t decide its future drilling plans until the ballot measure was decided.

“With the ballot measure defeated ConocoPhillips can get back to what we do best: putting oil in the pipeline and putting Alaskans back to work,” Marushack said.

ConocoPhillips leaders have said since 2018 that the company has an internal breakeven price target of approximately $40 per barrel for all of its production.

This year was once supposed to be the busiest drilling year ever on the North Slope for ConocoPhillips, according to Marushack, who said that while most of that work was shelved the company hopes to continue gradually ramping up activity.

“In 2021 we plan to get drilling back and we need to keep our workforce healthy and COVID in check to achieve our plans,” he said.

Suspending drilling was part of roughly $400 million in cuts ConocoPhillips made to its 2020 North Slope capital plan in response to the economic disruptions caused by the pandemic.

In addition to restarting Doyon Drilling Rig 25 at the CD-5 drill site — a satellite to the large Alpine field — in the first half of next year ConocoPhillips expects to start development drilling at its $1.4 billion Greater Mooses Tooth-2 oil project in the National Petroleum Reserve-Alaska; and begin drilling the Fiord West prospect within Alpine with the new extra long-reach Doyon Rig 26 next summer, according to Marushack.

According to Doyon, each rig requires about 100 workers, 54 of which are Doyon Drilling employees and the company has started filling those positions.

"This is a significant bit of positive news for (Doyon Drilling) and our employees as we enter the holiday season," Doyon Ltd. CEO Aaron Schutt said in a statement to the Journal. "We are pleased that the defeat of Ballot Measure 1 will result in increased opportunities for our company and for our employees."

According to Marushack, other coil tube drilling and workover rigs that will start back up in the Kuparuk field next year as well. The four rigs between the large fields are three more than would be scheduled for work if Ballot Measure 1 had passed, he claimed.

The tax increases in Ballot Measure 1, dubbed the Fair Share Act by its supporters, were specific to the large North Slope fields of Alpine, Kuparuk and Prudhoe; ConocoPhillips holds more than a 90 percent operator interest in both Alpine and Kuparuk and a 36 percent stake in Prudhoe, where Hilcorp Energy is the operator.

“While this is not the level of activity we anticipated at the start of 2020, it’s a good start,” Marushack said, also adding that he will be retiring from ConocoPhillips at the end of January.

Marushack has led ConocoPhillips Alaska since 2015. He will be succeeded by Erec Isaacson, a vice president in ConocoPhillips’ Gulf Coast business unit with prior experience working in Alaska for the company.

Finally, Marushack downplayed the likelihood ConocoPhillips will be a major player in the Arctic National Wildlife Refuge coastal plain lease sale the Bureau of Land Management is moving ahead with in the final days of the Trump administration.

“We really like what we’re doing in NPR-A, so we’ll probably focus on what we’re doing there,” Marushack said in response to a question from an audience member.

Elwood Brehmer can be reached at [email protected].

11/23/2020 - 10:18am