Alaska’s oil and gas future looks strong

Alaskans worried that BP’s sale of its Prudhoe Bay assets to Hilcorp means Alaska’s oil and gas potential is waning can be reassured: Hilcorp’s growing strength is just the beginning of a new wave of investment and activity heralding a more energetic phase in our resource-rich state’s top industry. Here are a few examples.

When we faced a potential gas shortage in Cook Inlet in 2012, Houston-based Hilcorp was purchasing mature fields from Chevron and Marathon. Hilcorp then embarked on a vigorous drilling and efficiency program, increasing oil and gas production and ensuring reliable energy supplies for Southcentral Alaska.

Hilcorp next took their plan north, buying in to four of BP’s North Slope units in 2014. Most recently they began producing viscous oil from their Moose Pad at Milne Point, increasing field production to levels not seen in years. With declining oil throughput in the trans-Alaska oil pipeline, Hilcorp’s aggressive strategy is delivering the kind of results Alaskans need, as well as the jobs critical to our economic security.

Oil Search, a Papua New Guinea independent producer new to Alaska, is systematically, deliberately and thoughtfully pursuing its Pikka development, aiming to start oil production in less than four years. Pikka will create high-paying jobs and boost state royalty revenue, and could increase pipeline throughput up to 20%. Oil Search and its partners Armstrong, a Colorado independent, and Repsol, a Spanish global oil company, have several other North Slope prospects that may not be far behind.

U.S. major ConocoPhillips may bring its Willow prospect online about the same time as Pikka, increasing oil production by a similar amount. This expansion of development westward from Alpine and Greater Moose's Tooth into the National Petroleum Reserve-Alaska will add critical infrastructure, making other western prospects more commercially feasible.

London-based newcomer Premier Oil, in partnership with Australian independent 88 Energy and Texas independent Burgundy Xploration, plans to drill this winter to further evaluate a block of leases called Project Icewine, 50 miles southwest of Prudhoe Bay. We’ve known since the 1960s this area holds potential for oil discoveries, and these optimistic independents believe they can bring this prospective area into production.

Other veteran and new independents have big exploration and development plans. We saw expressions of interest at CERAWeek last March, and I’m confident we’ll see evidence of that interest at the state’s North Slope areawide lease sale on Dec. 11.

Lease sales generate immediate revenue for Alaskans through lease sale bonus bids and rents, and are the third-largest source of revenue generated by the Division of Oil & Gas, after production royalties and net profit shares. Last year, lease sales brought in more than $28 million to support the state’s general fund, Alaska Permanent Fund and others.

Along with its regular lease offerings, the state plans to offer three Special Alaska Lease Sale Area (“SALSA”) blocks. These contiguous lease blocks represent a unique opportunity to acquire lease rights combined with a trove of associated well and seismic data and other information compiled by the state. The intent is to jump-start a company’s understanding of the North Slope and thereby accelerate drilling and development plans.

Also in December, the Bureau of Land Management will offer leases in the National Petroleum Reserve-Alaska and, for the first time ever and after decades of waiting, tracts in North America’s most prospective onshore prospect: the coastal plain of the Arctic National Wildlife Refuge.

Clearly, there are many reasons to be optimistic about the future of oil and gas in Alaska. New technologies, new investments and new players will add more jobs in the industry, more money in the economy and state treasury and put more oil in the pipeline. Last winter was the North Slope’s busiest in 15 years. That trend continues.

James B. Beckham is acting director of the state Division of Oil and Gas.

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