ConocoPhillips announces new oil discoveries after big exploration season in Alaska

A successful winter oil exploration effort in Arctic Alaska led to new discoveries for ConocoPhillips that could significantly boost oil production in the state, the company said Monday.

The announcement followed what one ConocoPhillips executive had called the company's biggest exploration season in Alaska in 15 years. But the Texas-based oil giant went further than originally planned, drilling six wells instead of five in a promising region hosting new discoveries in recent years, including at the company's Willow prospect on the western North Slope.

"ConocoPhillips' well results confirm the area's incredible oil potential and get us closer to securing significant volumes of oil for the Trans-Alaska Pipeline System," Gov. Bill Walker said in a statement Monday.

The ConocoPhillips drilling was conducted in the same region as a large discovery announced in 2015 by Spanish company Repsol and Armstrong Oil and Gas of Denver. The find is known as Pikka, and estimates have shown it could produce 120,000 barrels of oil daily.

[Overlooked formation may hold 120,000-barrel secret.]

Three of ConocoPhillips' newly drilled wells supported previous estimates at its Willow discovery, announced in early 2017, the company said Monday in a prepared statement. The field could hold at least 300 million barrels of recoverable oil and produce up to 100,000 barrels of oil daily, with production beginning as early as 2023, the company has said.

Roughly 550,000 barrels of oil flows daily through the trans-Alaska pipeline, the leading source of income for the state's general fund.

All six of the wells drilled this winter — three exploration and three appraisal — encountered oil, ConocoPhillips said.

The three exploration wells represent new discoveries for the company, it said.

"The results of this year's program are promising," said Matt Fox, ConocoPhillips executive vice president of strategy, exploration and technology. "We are excited about the opportunity to extend our legacy in Alaska, where we have a long track record of operational success and value creation."

Walker said his administration's "collaborative work" with the oil company and local Native entities was critical to supporting the exploration program. At one exploration well known as Putu 2, ConocoPhillips took unusual steps to reduce air emissions and other pollution from drilling, after residents in the nearby village of Nuiqsut expressed concern about effects on water and air quality.

"This is very exciting news for Alaska," said Andy Mack, the state's Natural Resources commissioner, by phone early Monday. "It shows Alaska is in a renaissance on the North Slope."

ConocoPhillips did not provide the estimated amount of oil associated with the new discoveries. It said it is reviewing the information it gathered and plans to conduct another strong exploration season next winter.

Exploration drilling on the North Slope occurs in winter, when equipment can be hauled on snow roads and ice roads atop the tundra.

Willow and Pikka have contributed to new thinking on the oil opportunities in the area, covering state and federal lands straddling the eastern edge of the 23-million National Petroleum Reserve in Alaska.

In the wake of the discoveries, the U.S. Geological Survey in December said the area contained a mean of 8.7 billion barrels of extractable oil using current technology. That is six times the prior estimate from 2010.

[Federal report finds 'huge' increase in North Slope oil potential.]

The Willow field is in NPRA, where the state and federal government split a royalty of 16.5 percent of oil produced. Production royalties are a key revenue-generator for Alaska.

One of the exploration wells was drilled west of the Willow prospect, pushing modern exploration efforts deeper into the reserve established in 1923, and farther from the industry infrastructure that has crept west from older fields.

Two of the exploration wells, Putu 2 on state land and Stony Hill 1 on federal land, were drilled east of Willow.

Those two wells are on a geological trend indicating they may be part of the Pikka oil pool, said David Houseknecht, USGS lead geologist for oil and gas resources in Alaska.

However, specific information, including the quality of oil ConocoPhillips found in the wells, is needed to better determine just how big Pikka might be, he said.

Houseknecht said more than 10 wells in the region have made discoveries associated with what's generally known as the Nanushuk play, a similar set of geologic conditions offering multiple exploration targets.

[Oil Search bought Nanushuk field for very little despite huge potential.]

Those wells have used modern, three-dimensional seismic data to assess geologic characteristics and locate drilling targets, he said.

"I would argue that industry is batting 1,000 percent on this play" after wells were drilled using modern seismic data, Houseknecht said.

Such success is "absolutely" encouraging for anyone seeking more oil production in Alaska, he said.

Natalie Lowman, communications director for ConocoPhillips in Alaska, said that assuming the state maintains its fiscal policies, the company's winter work could lead to billions of dollars of new investment in Alaska as work progresses at the discoveries.

Lowman didn't have information to suggest whether the Putu and Stony Hill wells are connected to Pikka, she said.

"We gathered a lot of information, and we got encouraging results, but we have to keep evaluating what we have," she said.

"The new discoveries really provide optimism regarding new development on the Slope," Lowman said. "It's a very encouraging season."