page With 200 installed, rural 2 leads way for microgrid systems

Vol. 25, No. 43 • www.PetroleumNews.com A weekly oil & gas newspaper based in Anchorage, Alaska Week of October 25, 2020 • $2.50

l FINANCE & ECONOMY More competition for O&G capital for Alaska from L 48 shale plays ALASKA’S LARGEST OIL PRODUCER ConocoPhillips’ planned acquisition of Oil price lift off in a $9.7 billion all-stock deal gives the big independent more invest- US air travel gains altitude; coming supply constraints hike price forecast ment opportunities in Lower 48 and Canada unconventional plays, a region that already By STEVE SUTHERLIN Daily screenings plunged below 100,000 pas- competes with the North Slope for capital. Petroleum News sengers on April 14, a 96% reduction from 2019. Not to suggest ConocoPhillips is going While Oct. 18 numbers — the highest since March anywhere, but in October 2014 Alaska lost et fuel demand may climb higher as U.S. pas- 16 — are a ten-fold improvement from the low for Pioneer Natural Resources to the lure of the Lower 48 shale 2020, that passenger count is less than half of the fields. For that matter, as BP Exploration was preparing to Jsenger numbers lifted above the 1 million mark for a single day, according to Transportation 2.6 million that passed TSA checkpoints Oct. 18, leave Alaska it expanded its Lower 48 unconventional hold- 2019. ings with a $10.5 billion acquisition of BHP’s American Security Administration passenger screening num- bers. The agency cleared 1,031,505 passengers for The TSA numbers nonetheless offer a bit of see INSIDER page 8 takeoff Oct. 18. blue sky to the outlook for oil prices. The recovery The TSA said 6.1 million people passed U.S. in jet fuel demand has lagged behind that of other transportation fuels since the pandemic began. airport checkpoints between Oct. 12 and Oct. 18 AOGCC denies reconsideration; On the supply side, this year’s decline in North — the highest weekly traveler volume it reported ACC challenging constitutionality American light tight oil production is likely to con- since the pandemic sent passenger counts into a The Alaska Oil and Gas Conservation has denied a request for tailspin in March. see OIL PRICES page 11 reconsideration of its new bonding requirements by Alaskan Crude Corp. l ACC is challenging the constitutionality of the increase in EXPLORATION & PRODUCTION bonding amounts as well as what it argues are regulations exceeding AOGCC’s statutory authority. In an Oct. 15 decision the commission upheld a $1.2 million Pikka on track for 2025 bonding requirement for the company. ACC is operator of record for three wells; it has a $200,000 Oil Search continues evaluating last winter’s Mitquq and Stirrup discoveries AOGCC bond in place, and the remaining $1 million is due in two annual $500,000 payments. By KAY CASHMAN Further appraisal drilling of the Mitquq This is the final AOGCC order on the matter. ACC has 30 days Petroleum News to appeal the commission’s order to Alaska Superior Court. and Stirrup trends will be required to confirm the size and extent of these see AOGCC DENIAL page 9 il Search’s summer campaign on Alaska’s ONorth Slope has ended with all work planned discoveries, with results to date for the first phase of the three-phase Pikka develop- continuing to support the potential Alberta poised to test market with ment completed, providing year-round access to the development of Mitquq as a satellite to auctions, higher minimum bids project, the company said Oct. 20 in its third quar- Pikka and Stirrup as a potential stand- ter report. Through the 1990s and the first alone development.” The summer program involved finishing the fol- decade of this century, the Alberta gov- lowing: ernment feasted on the sale of oil and In an Aug. 25 interview with Petroleum News, • Nanushuk access road to first drilling pad natural gas exploration rights at its twice- Oil Search Managing Director Keiran Wulff said (ND-B road). monthly auctions, times when raking in the company is now focused on developing • Nanushuk operations pad. anything less than C$2 billion a year was Pikka’s big Nanushuk reservoir (and smaller a source of worry. • Nanushuk process facility pad. Those days are long gone and never • Bridge installation across the Miluveach River. see PIKKA ON TRACK page 7 likely to return. During a protracted period of bearish SONYA SAVAGE l GOVERNMENT commodity prices, compounded by the negative impact of COVID-19 on capital spending, Alberta see AUCTION TESTS page 4 Some bonding reductions Alberta looks to diversify energy AOGCC to amend regs, reducing some bond amounts, include some exemptions industry with geothermal, hydrogen By KRISTEN NELSON The Alberta government has set its sights on the New The proposed changes to the wellheads Petroleum News Energy Age by promising geothermal regulations this fall and bond amount table are for 40 or fewer targeting global hydrogen exports by 2040 to resuscitate its he Alaska Oil and Gas Conservation permitted wellheads. natural gas industry. Commission is proposing changes to its bond- Geothermal technology — which is well advanced in the T ing regulations which would amend the permitted United States, Indonesia, the Philippines, Turkey, New Prior to May 2019, the commission’s bonding wellheads bond amount table and allow a reduc- Zealand and Iceland — harnesses natural heat energy generat- requirement to secure plugging and abandonment tion in the requisite bond amount if an operator has ed beneath the Earth’s crust, with heat pumps extracting steam had been $100,000 for a single well and $200,000 or hot water to surface level. a bond in place with the landowner dedicated for multiple wells. The May 2019 changes raised Three types of geothermal power currently process the exclusively to plugging and abandonment. that to $400,000 for one to 10 permitted wellheads; energy source — dry steam power, flash steam power stations The commission adopted new bonding require- $6 million for 11-40 wells; $10 million for 41-100 and binary cycle power stations. ments in May 2019 after a lengthy series of hear- wells; $20 million for 101-1,000 wells; and $30 The constant and predictable availability of geothermal ings, reflecting its concern that companies could million for more than 1,000 wells. abandon wells, leaving the landowner, typically The changes the commission is proposing are see ENERGY DIVERSITY page 10 the State of Alaska, to pick up the cost for plugging and abandonment. see BONDING REDUCTIONS page 10 2 PETROLEUM NEWS • WEEK OF OCTOBER 25, 2020 l ALTERNATIVE ENERGY Leading the way for microgrid systems Rural Alaska communities implementing cutting edge renewable energy and integration systems in effort to reduce diesel dependency

By ALAN BAILEY For Petroleum News

hile the Alaska Railbelt has ready access to natural Wgas for power generation, rural communities in the state have long had to rely on the use of expensive and errat- ically priced diesel fuel to meet their electricity production needs. For a number of years the rural communities have been implementing renewable energy systems in an effort to ASSOCIATION ELECTRIC KOTZEBUE displace the use of diesel with more predictably priced and affordable generation systems. The consequent need to inte- grate several different power sources, each with varying generation characteristics, into single microgrids for village electricity supplies has placed rural Alaska at the cutting edge of these microgrid and renewable energy integration technologies, officials engaged in rural power supplies told a meeting of Commonwealth North on Oct. 14. Early adoption in rural Alaska Rural Alaska investigates and adopts new technologies well in advance of the Railbelt and major grids worldwide, often by decades, said Rob Roys, deployment director for Launch Alaska, an organization that facilitates the imple- mentation of renewable energy and other environmentally Kotzebue Electric Association’s solar and wind farm. Advanced technology integrates wind and solar energy with diesel see MICROGRID SYSTEMS page 3 generation and battery storage to reduce diesel consumption. contents Petroleum News Alaska’s source for oil and gas news ON THE COVER ALTERNATIVE ENERGY Oil price lift off 2 Leading the way for microgrid systems Air travel shows gains; coming supply constraints hike price outlook Rural Alaska communities implementing cutting edge Pikka on track for 2025 renewable energy and integration systems in effort to reduce diesel dependency Oil Search continues evaluating Mitquq and Stirrup discoveries Some bonding reductions EXPLORATION & PRODUCTION AOGCC to amend regs, reducing some bond amounts 4 US rotary rig count jumps up by 13 to 282 Oil Patch Insider: More competition for O&G 6 Hilcorp drilling storage well in Kenai unit capital for Alaska from L 48 shale plays SIDEBAR, PAGE 8: Moody’s gives deal thumbs up PIPELINES & DOWNSTREAM AOGCC denies reconsideration; 4 New move to shut down Dakota Access ACC challenging constitutionality THE PRODUCERS PREVIEW Alberta poised to test market with 5 Eni operates neighboring ANS units auctions, higher minimum bids Italian company hesitant to resume drilling at nearshore Alberta looks to diversify energy Oooguruk and Nikaitchuq units, plans industry with geothermal, hydrogen to continue maintenance work

Alaska’s Oil and Gas Consultants

Geoscience Engineering 3601 C Street, Suite 1424 Anchorage, AK 99503 Project Management (907) 272-1232 (907) 272-1344 Seismic and Well Data www.petroak.com [email protected] PETROLEUM NEWS • WEEK OF OCTOBER 25, 2020 3 continued from page 2 is on track to achieve a 10% reduction in diesel fuel imports in 2020, Mathiasson MICROGRID SYSTEMS said. Projects include a solar farm in friendly systems in Alaska. Rural electric Kotzebue, a solar array in Ambler and an utilities began incorporating utility scale Ambler biomass project. wind technology into their grids as early as A pilot project in Kobuk and Ambler is 1997, Roys said. By comparison, wind assessing the practicalities of using farms linked into the Railbelt grid did not reversible heat pumps for heating and cool- appear until 2012 and 2013, he said. ing houses — an electrically powered heat The implementation of utility scale pump, a kind of reverse air conditioner, can solar has surged in the last two year, both in provide heat more efficiently than a con- rural Alaska and on the Railbelt. ventional electric stove. The electricity Golden Valley Electric Association, on supplies for the pumps are assisted by the Railbelt grid, was an early pioneer in direct connection to solar arrays that can the use of energy storage to save any offset power from the grid, Mathiasson excess energy as a backup power source. In said. Despite the cold climate, it appears 2003 the utility implemented a 26- that people can use the heat pumps through megawatt battery energy storage system, to December, before having to switch back the largest system of its type in the world at to conventional oil stoves, he said. the time. Chugach Electric Association A project in Ambler, designed to assess later implemented a hybrid flywheel and the potential to reduce energy needs battery energy system. Alaska Telecom through energy efficiency and funded by Association is currently constructing a 46- the borough’s Village Improvement Fund, megawatt storage system, Roys said. involves the installation of LED lighting, But the rural utilities have been more solar panels and heat pumps for all 70 aggressive in implementing energy storage. households in the village. And there are now more than a dozen util- Regional utility energy projects in five ity storage systems throughout the state, other communities involve the installation Roys said. of various combinations of wind power, Increasing complexity solar power and battery storage, Mathiasson said. The combination of storage with an increasing variety of power source tech- KEA energy transition nologies has magnified the complexity of Matt Bergan, wind farm project engi- the rural electrical systems, with neer for Kotzebue Electric Association, hydropower, solar power, wind power in described KEA’s efforts to transition from various combinations having to be integrat- diesel power to renewables, to minimize ed and connected to dispatchable electrical diesel use. KEA is the hub utility for 3,200 loads in some of the most sophisticated people and 11 villages in the Northwest power systems in the world. Expertise Arctic Borough, he said. from Alaska in the advanced algorithms KEA began operating a hybrid wind and required for these systems is now being diesel system in 1997 — 15 to 25% of the exported around the globe, Roys said. utility’s annual energy now comes from For example, Kodiak has combined 31 wind, Bergan said. megawatts of hydropower with 9 The original wind farm consisted of 19 megawatts of wind generation, 3 wind turbines. However, the utility has megawatts of battery storage and 2 recently replaced eight of these turbines megawatts of flywheel energy storage into with a solar array. Two of the turbines are an electricity supply system that can oper- large, modern units. The plan going for- ate annually with more than 99% renew- ward is to install two or three more large able energy, Roys said. turbines and complete the replacement of And with more than 200 microgrids older, smaller turbines with solar power. A operating in the state and an installed community scale battery supports the sys- capacity exceeding 800 megawatts, Alaska tem. has the largest installed base of microgrids The utility is able to additionally save in the world, he said. some diesel power by selling electric heat “In rural Alaska the ability to operate from excess wind power to the local hospi- “This job helped WWee strriivvee with no diesel online is the new standard tal. for operations,” Roys said. me to be able to livveee,, Bergan sees 50% of power generation wwoorrkk and Northwest Arctic Borough’s vision capacity as being the upper limit of renew- to purchase the able energy usage. Increasing renewable thrriivvee in Ingemar Mathiasson, energy manager usage beyond that level would be cost pro- equipment I need for Northwest Arctic Borough, emphasized hibitive, he said. to go hunting.” QWT|4GIKQP the importance of reducing rural Alaska’s Asked about the feasibility of bringing dependence on diesel fuel. The borough in alternative fuels to diesel, Mathiasson - Daris Larson, Donlin Gold has formed an energy steering committee said that the Northwest Arctic Borough had Contract Worker #LiveThriveYK that is developing a vision for the energy investigated the logistics of shipping in nat- future for the region. The target is that 50% ural gas or propane but had found this to be of energy for heating and electricity sup- financially and logistically impractical plies will come from local sources by 2050. using the shallow rivers of the region. l Part of the objective is to address climate Calista Corporation supports the change through the reduction of carbon dioxide emissions. Currently the borough Donlin Gold Project because strict environmental oversight, good-paying jobs and affordable energy brought by the project will allow us to grow healthy communities.

To advertise in Petroleum News, contact Susan Crane at 907.770.5592 petroleumnews.com 4 PETROLEUM NEWS • WEEK OF OCTOBER 25, 2020

EXPLORATION & PRODUCTION PIPELINES & DOWNSTREAM US rotary rig count jumps up by 13 to 282 New move to shut down Dakota Access The Baker Hughes U.S. rotary rig count was at 282 for the week ending Oct. 16, up Native American tribes opposed to the Dakota Access Pipeline once again have by 13 from 269 the previous week — the largest increase the count has seen since it asked a federal judge to stop the flow of oil while the legal battle over the line’s turned around in mid-August from a low for the year. The count is still down substan- future plays out. tially from a year ago, by 569 from 851. The Standing Rock Sioux and other tribes succeeded on their first attempt, When the count hit 244 the week of Aug. 14, it was not just the low for 2020, but only to have an appeals court overturn U.S. District Judge James Boasberg’s shut- the lowest it has been since the Houston based oilfield services company began issuing down order earlier this year. Now, they’re asking the judge to clarify his earlier a weekly U.S. rig count in 1944. ruling to satisfy the appellate judges and then to again order the line to cease oper- Prior to this year, the low was 404 rigs in May 2016. The count peaked at 4,530 in ations, the Bismarck Tribune reported. 1981. The tribes argue that potential harm to their water supply outweighs any eco- At the beginning of the year the count was in the low 790s, where it remained nomic impacts of shutting down the line, which has been moving North Dakota through mid-March, when it began to fall, dropping below what had been the historic oil to Illinois for more than three years. low in early May with a count of 374 and continuing to drop through the third week of “The Tribes are irreparably harmed by the ongoing operation of the pipeline, August when it gained back 10 rigs. through the exposure to catastrophic risk, through the ongoing trauma of the gov- This week’s count includes 205 rigs targeting oil, up 12 from the previous week and ernment’s refusal to comply with the law, and through undermining the Tribes’ down 508 from a year ago, 74 rigs targeting gas, up one from the previous week and sovereign governmental role to protect their members and respond to potential down 63 from a year ago and three miscellaneous rigs, unchanged from the previous disasters,” attorneys Jan Hasselman and Nicole Ducheneaux wrote in an Oct. 16 week and up two from a year ago. filing. Twenty-one of the holes were directional, 240 were horizontal and 21 were vertical. Tribes fear a spill into the Missouri River just north of the Standing Rock The rig count for Texas (123), which has the most active rigs in the country, was up Reservation would pollute their water supply. Pipeline operator Energy Transfer by seven from the previous week, but down 300 from a year ago. Utah (3) was up by three rigs from the previous week, when it had no active rigs. and the Army Corps of Engineers both maintain the pipeline is safe. Prolonged Oklahoma (14) and Wyoming (3) were each up by two rigs. North Dakota (11) and protests in 2016 and 2017 drew thousands of people to camps near the river cross- West Virginia (8) were each up by one rig. ing and resulted in hundreds of arrests. Colorado (4) was down by one rig from the previous week; Louisiana (38) was U.S. Department of Justice spokeswoman Danielle Nichols declined to com- down by two rigs. ment Oct. 19 on the tribes’ filing. The Corps and Energy Transfer have until Nov. Rig counts were unchanged in the remaining states: Alaska (2), California (4), New 20 to file a formal response. Mexico (45), Ohio (6) and Pennsylvania (18). Boasberg, who is overseeing the four-year-old lawsuit filed by the tribes, Baker Hughes shows Alaska with two active rigs Oct. 17, unchanged from the pre- ordered an extensive environmental study last spring because he felt previous, vious week and down by six from a year ago. less-extensive environmental analysis by the Corps left lingering questions. The rig count in the Permian, the most active basin in the country, was unchanged Boasberg in July revoked the easement that allows for the river crossing and from the previous week at 130, but down 292 from a count of 422 a year ago. ordered the pipeline shut down until its environmental soundness was proven. A —KRISTEN NELSON federal appeals court allowed oil to keep flowing, however, ruling that Boasberg hadn’t justified a shutdown. That same appeals court is now determining whether to uphold his decision regarding the study. Tribes are asking Boasberg to issue an injunction to shut down the pipeline while the legal fight plays out. —ASSOCIATED PRESS

continued from page 1 compared with a record C$3.5 billion in 2011 when oil sands rights were in high AUCTION TESTS demand. held only six lease and license auctions in Higher minimum bid the first three months of this year, raising To prevent bargain-basement sales, the a meagre C$26 million. government plans to implement a higher “We were in an absolute crisis,” said minimum bid. Energy Minister Sonya Savage, com- Government documents obtained by www.PetroleumNews.com menting on the government’s decision to the Financial Post show the government cancel land sales since early April to pre- has considered minimum bids of C$50 ADDRESS vent the disposal of exploration prospects Kay Cashman PUBLISHER & FOUNDER per hectare (2.471 acres), compared with P.O. Box 231647 for little to no value. the current minimum bid of C$2.50. Anchorage, AK 99523-1647 “We didn’t know how low (the auc- Mary Mack CEO & GENERAL MANAGER In 2019, 59% of all land parcels sold tions would fall). There was no question in Alberta for less than C$50, compared NEWS that no one was going to be bringing on Kristen Nelson EDITOR-IN-CHIEF with only 16% in Saskatchewan and 32% 907.522.9469 new drilling,” she said. [email protected] in British Columbia. Susan Crane ADVERTISING DIRECTOR Auctions by end of year But the industry is not happy with CIRCULATION Alberta’s move to raise minimum bids. Heather Yates BOOKKEEPER 907.522.9469 But Savage confirmed to the Financial Ben Brunnen, vice president of fiscal [email protected] Post that Alberta is now poised to resume and economic policy at the Canadian Marti Reeve SPECIAL PUBLICATIONS DIRECTOR auctions by the end of 2020, despite ques- Association of Petroleum Producers, ADVERTISING tions about whether the government can urged the government to “proceed with Steven Merritt PRODUCTION DIRECTOR Susan Crane • 907.770.5592 fetch reasonable values for its rights. [email protected] caution.” She said upstream companies have He said that “for just about any bid- Alan Bailey CONTRIBUTING WRITER been urging the province “to open land ding process, there’s always an assump- Petroleum News and its supplement, sales up otherwise the capital (investment Petroleum Directory, are owned by tion that there would be another bidder. Eric Lidji CONTRIBUTING WRITER in exploration) will be going elsewhere.” Petroleum Newspapers of Alaska That competition for bidding has general- LLC. The newspaper is published Savage said the auction process will ly led to relatively healthy bid prices for Gary Park CONTRIBUTING WRITER (CANADA) weekly. Several of the individuals take steps to ensure the land isn’t sold too listed above work for independent land, despite where the minimum bid cheaply. companies that contract services to sits.” Steve Sutherlin CONTRIBUTING WRITER Petroleum Newspapers of Alaska If returns from the six auctions held so —GARY PARK LLC or are freelance writers. far this year were adjusted to cover a full Judy Patrick Photography CONTRACT PHOTOGRAPHER year, they would fall short of the 2019 returns of C$119 million, the low point Forrest Crane CONTRACT PHOTOGRAPHER since data was first collected in 1977,

Renee Garbutt CIRCULATION MANAGER API 2 CCU STANDARD CUTTING BOXES BOTTLE RACKS OWNER: Petroleum Newspapers of Alaska LLC (PNA) PRESERVATION Petroleum News (ISSN 1544-3612) • Vol. 25, No. 43 • Week of October 25, 2020 D RACKS SERVICES RUM Published weekly. Address: 5441 Old Seward, #3, Anchorage, AK 99518 TANKS (Please mail ALL correspondence to: NFC & GPS P.O. Box 231647 Anchorage, AK 99523-1647) Subscription prices in U.S. — $118.00 1 year, $216.00 2 years PALLET RACKS Canada — $206.00 1 year, $375.00 2 years O: 907-283-0580 CARGO BOXES Overseas (sent air mail) — $240.00 1 year, $436.00 2 years C: 985-518-3377 CARGO BASKETS “Periodicals postage paid at Anchorage, AK 99502-9986.” 42134 Kenai Spur Hwy. Since 2008 ON-SITE SPILL UNITS POSTMASTER: Send address changes to Petroleum News, P.O. Box 231647 Anchorage, AK 99523-1647.

PETROLEUM NEWS • WEEK OF OCTOBER 25, 2020 5

l THE PRODUCERS MAGAZINE PREVIEW Eni operates neighboring ANS units Italian company hesitant to resume drilling at nearshore Oooguruk and Nikaitchuq units, plans to continue maintenance work

By ERIC LIDJI The company subsequently cold- For Petroleum News stacked Doyon Rig 15 and Nordic he fates of the Nikaitchuq and Calista Rig 4 but is evaluating TOooguruk units have long been inter- electrical submersible pump twined. replacements projects (at Both prospects were discovered during Nikaitchuq) in early 2021. INC. CO. ENI US OPERATING related exploration efforts at the turn of the 21st century. In the years since, oper- ators of both units try, and the North Slope in particular. have faced similar The proration of the trans-Alaska oil challenges, arising Coming pipeline and the curtailment of the gas handling capacity at the Kuparuk River from the complica- The tions of working on Producers unit created secondary problems at nearshore prospects Oooguruk. The unit produced 8,700 bar- in the Arctic Ocean. rels of oil per day in March 2020 and just The solutions 6,300 bpd in May 2020. brought to bear at Prompted by those infrastructure chal- Oil & gas companies investing in lenges and by the broader economic con- one unit have often The Producers, an annual Alaska’s future publication from Petroleum News informed decision ditions of falling oil prices and declining November 2020 making at the other. demand, Eni deferred its original plans to But the units are conduct several workover projects in now more intertwined than at any point in 2020 in advance of resuming the drilling their producing lives. After being a of new wells at the unit in 2021. The com- minority partner at Oooguruk for its pany instead performed 15 maintenance entire existence as a producing field, Eni and repair projects on 10 wells. US Operating Co. Inc. is wrapping up its The company also undertook a range first year as the operator of the neighbor- of other maintenance activities, including ing unit. a gas debottlenecking project responsible for “several hundred” barrels per day of Oooguruk production. In its first year as operator of Even with economic conditions now Oooguruk, the American subsidiary of the improving, Eni is hesitant to resume Italian major Eni Petroleum was ham- activities. The company is not planning pered by a series of external factors, most- drilling or workover projects for the com- ly arising from the impact of the coron- ing development year, running through avirus pandemic on the Alaska oil indus- see PRODUCERS PREVIEW page 6 NORTHN H SLOPEE BOROUBOROUGHUGH GRAVELGRRAVEL MINEM SISITESITES Foundation of the Future

MINMINENEE SITE F PUT 23 MINEM SITE

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Quality & Convenience FOR SALES INFO CALL (907) 852-0320 6 PETROLEUM NEWS • WEEK OF OCTOBER 25, 2020

continued from page 5 After being a minority partner at EXPLORATION & PRODUCTION PRODUCERS PREVIEW Oooguruk for its entire existence as a producing field, Eni US September 2021, although it is planning Operating Co. Inc. is wrapping up two well maintenance projects. Further down the road, the company is its first year as the operator of the evaluating two appraisal wells — ERD- neighboring unit. N01 and ERD-N02 — on leases outside existing participating areas. The program cessing facilities at the Oooguruk Tie-in would test the productivity and quality of Pad to avoid those Kuparuk River unit oil on three leases beyond the reach of constraints. The company also launched a existing drilling but within the technical study looking at the possibility of con- limitations of drilling technology from its necting the power generation systems at offshore drilling pad. Oooguruk and Nikaitchuq, to improve Some of the challenges at Oooguruk efficiency at both units. this year are an extreme version of an Oooguruk produces from three hori- ongoing challenge at the unit. The lack of zons: the Oooguruk-Kuparuk participat- independent infrastructure at the unit has ing area, the Oooguruk-Nuiqsut partici- forced previous operators to rely on infra- pating area, and the Oooguruk-Torok par- structure operated by neighboring ticipating area. ConocoPhillips. The unit produced 3,023,150 barrels of ARCO Alaska Inc. discovered oil (approximately 8,282 barrels per day) Oooguruk in 1992, and independent in 2019 and 1,476,908 barrels (approxi- Armstrong Oil & Gas Inc. delineated the mately 8,114 barrels per day) in the first “Northwest Kuparuk” prospect in the half of 2020. early 2000s. Through a series of deals, Texas-based Pioneer Natural Resources Nikaitchuq Alaska LLC acquired a 70% interest and Eni completed some of its work plan at became operator of the unit, with Eni Nikaitchuq early in the development year. acquiring the remaining 30% interest. Before suspending operations, the After just five years of work, Pioneer company drilled the SP03-NE2 producer brought the nearshore Oooguruk unit into and the dual-lateral producers SP03-NE2 production in June 2008, becoming the L1 and SP10-FN1 L1 from the Spy Island first independent producer on the North drilling site. Slope. The original three-well program In late 2013, after optimizing comple- planned for the unit included a different tion techniques at the unit and expanding slate of wells: the SP03-FN6 producer the resource with a large discovery to the and the SI02-SE6 and SI06-FN8 water south called the Nuna prospect, Pioneer injection wells. sold the Oooguruk unit to the independ- The SP03-NE2 project began with the ent company Caelus Natural Resources SP03-NE2 PH pilot hole to the northwest Alaska LLC. to evaluate the prospect. Positive results Caelus was a smaller company with a led to an expansion of drilling plans for history of short-term projects. The com- the area. pany announced major plans and even The workover campaign included sanctioned the Nuna project. But when projects at the SP12-SE3 producer, SP04- prices dropped in 2016, the company sus- SE5 producer and SD37-DSP01 disposal pended regular operations and deferred well at the Spy Island drill site and the Hilcorp drilling storage well in Kenai unit development work. The company eventu- OP05-06 producer, OP17-02 producer On Oct. 16, Alaska’s Division of Oil and Gas approved an amendment ally sold its stake in Oooguruk to its part- and OP22-WW03 water well at the Hilcorp Alaska applied for Sept. 15 to the Kenai unit’s plan of operations. The ner Eni Petroleum in mid-2019. Oliktok Point drilling pad. project involves drilling a new Sterling pool 6 gas storage well from the existing Pioneer made a strategic decision to The company subsequently cold- KU 34-31 gravel pad and building associated infrastructure, including a well use facilities at the Kuparuk River unit stacked Doyon Rig 15 and Nordic Calista cellar and conductor, flowline, and electrical instrumentation. rather than bear the expense of building Rig 4 but is evaluating electrical sub- The KU 34-31 pad is approximately 6 miles south of the city of Kenai on the independent facilities at Oooguruk. It mersible pump replacements projects in Kenai Peninsula in southcentral Alaska. occasionally struggled with the lack of early 2021. The federally managed Kenai Gas Field is on private surface lands in the control created by that decision, as did As with some other companies, the Caelus in its years as operator. suspension of drilling activities allowed see STORAGE WELL page 10 Eni recently launched a study to gauge Eni to complete some maintenance activ- the feasibility of installing partial gas pro- ities that would have required a tempo- rary shutdown. Even so, the company is planning a summer 2021 turnaround at Nikaitchuq to coincide with a planned turnaround at the Our people Kuparuk River Unit Central Processing Facility 2. make the But the shutdown of regional infra- structure impacted Nikaitchuq produc- difference. tion. The unit produced 19,400 barrels per day between September 2019 and May 2020 but only 17,100 barrels per day dur- The employees of NANA WorleyParsons and its ing the month when throughput on the subsidiary Kairos, LLC specialize in engineering trans-Alaska oil pipeline was prorated. and design disciplines, as well as support Production returned to 20,000 barrels per services. Our team is made up of people with day in early June. the expertise our customers rely on every day. Eni also added six well slots to one of its drilling pads to accommodate the pro- Resourceful. Reliable. Innovative. posed NN02 exploratory well and as many as four additional Nikaitchuq wells. The company delayed the project after partner Shell declined to participate in the project. Eni subsequently received per- mission from federal authorities to sus- pend operations for two years, until April 2022. In its plan for the current development year, running through September 2021, the company proposed no new drilling For more information, visit: nanaworleyparsons.com or kairos-nwp.com see PRODUCERS PREVIEW page 7 PETROLEUM NEWS • WEEK OF OCTOBER 25, 2020 7 continued from page 1 finance, whilst ensuring the project can be expanded efficiently without compromis- PIKKA ON TRACK ing full value,” Wulff said. Oil Search has not yet released the stacked accumulations) through the phased amount of oil each phase is expected to approach that will reduce upfront develop- produce, likely due in part to the fact it is ment costs and allow cash flow from Phase still evaluating the results of last winter’s 1 oil production with a single drill site to PHOTO COURTESY OIL SEARCH COURTESY PHOTO exploration drilling. fund the subsequent two phases. Originally, Pikka was expected to pro- The new approach will establish a duce 130,000-135,000 barrels of oil per strong foundation for the development of day at its peak. not only the Pikka unit, but also for During third quarter, Oil Search contin- prospective nearby acreage, the company ued to assess the results of its Mitquq and said. Stirrup discoveries. In combination with Capital spending down the latest seismic data, the results have pro- vided an improved understanding of the Oil Search expects a reduction in even geology and potential productivity of the more costs than it estimated March 18 or Nanushuk play, the company said Sept. 30: Oil Search’s summer work program included bridge installation across the Miluveach River. this past August. “Further appraisal drilling of the Mitquq As of March 18, when the COVID-19 However, some Oil Search workers employee numbers have remained at 150. and Stirrup trends will be required to con- pandemic prompted a closure of explo- were laid off in March and April. firm the size and extent of these discover- ration and development activities on the “While seasonal contractors associated Mitquq, Stirrup evaluation ies, with results to date continuing to sup- North Slope, Oil Search projected its 2020 with our winter drilling and exploration port the potential development of Mitquq capital spend in Alaska for exploration, Meanwhile, on Sept. 30 Wulff noted programs represent the majority (of those as a satellite to Pikka and Stirrup as a evaluation and development would be that the Oil Search Alaska team, in cooper- March and April layoffs), we have reduced potential stand-alone development.” between $260-300 million, down from ear- ation with the company’s key stakeholders, full-time (Alaska) employees by about A final investment decision on Pikka is lier expectations of $340-380 million. As has continued to make excellent progress 15%,” which brought the local total to 150 “currently forecast for the end of 2021,” of Sept. 30, the company’s full year guid- on the value and capital optimization stud- individuals, company spokeswoman Amy Oil Search said Sept. 30. l ance had dropped to $225-250 million. ies for Pikka’s new three-phase design. Burnett told Petroleum News July 1. The reduction is largely due to the “These changes will make the project On Oct. 20, Burnett said Alaska rephrasing of front-end engineering design resilient at lower oil prices and easier to activities for Pikka, plus a concerted effort to reduce costs by Oil Search and its ven- dors. Oil Search continues to work to get nabors.com development costs down. Having already reduced costs to match an oil price in the low $40s, the company is looking to get them below $40 per barrel before re- launching its partial divestment (15%) in a formal sell-down sometime in 2021. No more layoffs in Alaska Oil Search does not have any explo- ration wells planned for the upcoming 2020-21 North Slope winter drilling season due to uncertain market conditions. Although the company halted its plans for limited early production of Pikka in 2022, choosing instead to concentrate on three- phase development that would begin pro- duction in 2025, Alaska has fared compar- atively well in terms of layoffs compared to other areas within the company’s portfo- lio. The latest round of dismissals announced by Wulff on July 1 did not involve any Alaska workers.

continued from page 6 PRODUCERS PREVIEW and said it would perform workovers as needed. “Eni reports the global COVID-19 Safer. Smarter. pandemic and subsequent global oil demand and price impact has temporarily curtailed planned drilling activity in the 2020 (Plan of Development),” Eni wrote. “Actual activities may change as condi- tions improve.” Nikaitchuq produced 6,772,787 bar- Better. rels of oil (approximately 18,555 bpd) in 2019, compared to 3,489,408 barrels (approximately 19,172 bpd) in the first Our CDR2-AC rig reflects the latest innovations in Arctic drilling to provide our customers with half of 2020. incident free performance and operational and technical excellence. Eni acquired the Nikaitchuq leases CDR2-AC is the first Arctic rig designed and built by Nabors specifically for Coil Tubing Drilling through purchases in 2005 and 2007, operations. The rig was built to optimize CTD managed pressure drilling to provide precise control sanctioned a $1.45 billion development of wellbore pressures for improved safety, decreased costs, and increased wellbore lengths. program in January 2008, and brought the unit into production in early 2011. Combining safety and environmental excellence with greater efficiency means CDR2-AC can deliver The company completed its initial the high value results customers have come to expect from Alaska’s premier drilling contractor. onshore Oliktok Point pad drilling pro- Learn more about Nabors’ new drilling technologies at Nabors.com. gram in 2012 and shifted to continuous drilling at the offshore Spy Island drill site. l

Editor’s note: See full story in The Producers magazine, being released in November by Petroleum News. 8 PETROLEUM NEWS • WEEK OF OCTOBER 25, 2020

continued from page 1 Moody’s gives deal thumbs up Absorption of the much smaller INSIDER Concho will give ConocoPhillips a Moody’s Investor Service said Oct. 19 that ConocoPhillips’ acquisition of huge footprint in the Delaware Concho Resources is “credit positive (COP A3 stable.)” shale assets. and Midland portions of the “Concho’s large-scale Permian operations will significantly enhance COP’s Of course, Houston-based scale, diversification, and portfolio durability while simultaneously improving ConocoPhillips is already an “uncon- Permian basin, as well as solid capital flexibility and cost efficiency,” Moody’s reported. ventional powerhouse,” as it was recent- positions in the Eagle Ford and However, the transaction “comes at a time of low oil prices and heightened ly described by Upstream. Absorption of Bakken in the Lower 48 and the uncertainty around global economic and oil demand recovery. The greater expo- the much smaller Midland, Texas-based Montney in Canada. sure to shale assets will also increase COP’s relatively low (production) decline Concho will give ConocoPhillips a huge rate.” footprint in the Delaware and Midland ConocoPhillips will need to “close the transaction, execute from an opera- portions of the Permian basin, as well as unmatched scale and quality across the tional standpoint, and achieve the planned cost synergies,” the investor service solid positions in the Eagle Ford and important value drivers in our business: said. Bakken in the an enviable low cost of supply asset Concho’s large production and reserves base as well as its extensive drilling Lower 48 and the base, a strong balance sheet, a disci- experience in the Permian basin “will immediately transform COP into a leading Montney in plined capital allocation approach … Permian basin producer. Concho produced 320,000 barrels of oil equivalent per Canada. and great people. Importantly, the trans- day in the second quarter of 2020 and had 1 billion of proved reserves (75% The deal, action meets our long-stated and clear developed) at the end of 2019. The combined company will have over 400,000 announced Oct. 19 criteria for mergers and acquisitions boe/d of Permian basin production significantly increasing COP’s overall and expected to because it is completely consistent with unconventional production, representing almost one half of future companywide close in first quarter our financial and operational frame- production from about a third of total production today,” Moody’s said, adding 2021, will make work.” that the acquisition “is consistent with COP’s long-term strategy of maintaining ConocoPhillips the Sector consolidation is “both neces- RYAN LANCE a sustainable asset base with low cost of supply, strong organic growth potential largest independent sary and inevitable,” Lance told analysts and manageable ESG risks.” (ESG stands for environmental, social and gover- oil and gas company in terms of daily after the announcement. “We both nance.) production, Houston Business Journal believe our industry needs solutions that ConocoPhillips will be paying “about $18/boe of PD reserves and $42,000 reported. address the lack of scale, poor returns per flowing boe, which we view to be reasonable in today’s price environment. The agreement calls for Concho and, increasingly, the challenges and We estimate Concho’s breakeven cost to be around $30/boe. Concho’s 550,000 shareholders to receive 1.46 shares of opportunities of environmental, social low-cost, oil-weighted, and mostly contiguous net leasehold acreage in the ConocoPhillips common stock for each and governance matters.” Delaware basin and Midland basin will provide COP a deep drilling inventory share of Concho, which represents a Roughly half of the combined com- 15% premium to closing prices on Oct. allowing significant capital and operational flexibility.” pany’s production would be from the 13, per the companies. ConocoPhillips The “contemplated combination synergies should also improve COP’s cost Lower 48, with 15% coming from shareholders will own about 79% of the and return metrics over time,” Moody’s said. Alaska and the remaining 35% from combined company, with Concho share- international assets (ConocoPhillips is holders holding the other 21%. active in 16 countries). The combined enterprise value is The company intends to return more expected to be approximately $60 bil- than 30% of its cash generated from lion — its pro forma net debt was $12 operations to shareholders through regu- billion as of June 30. Fire Protection Specialists lar dividends and other distributions, By 2022 the companies said the com- consistent with ConocoPhillips’s current bined company is expected to realize GMW has 17 years of experience working in Deadhorse targets. $500 million in annual cost and capital supporting oil field activities on the North Slope of Alaska. Lance said those payouts help distin- savings, thanks in part to lower adminis- guish ConocoPhillips from rival oil and trative expenses and a reduction in its GMW Fire Protection has offices in Anchorage and Deadhorse gas companies. global exploration program. “You’ve got to deliver financial GMW Provides the Following Services The combined company will have returns in this business,” he said. • Fire Sprinkler Design and Installation • Fire Extinguisher Inspection and Service pro forma production of more than 1.5 In its summary of the transaction’s • Fire Sprinkler Inspections and Maintenance including hydro-testing and re-charge million barrels of oil equivalent per day. benefits, ConocoPhillips said: “Massive, • Fire Alarm Design and Installation • Fire pump certification and inspections After the acquisition closes, Concho diversified and low cost of supply • Fire Alarm Inspections and Maintenance • Portable gas monitors and systems Chairman and CEO Tim Leach will join resource base provides years of high- • Special Hazards Design and Installation installation and calibration ConocoPhillips’ board of directors and including FM-200 and water mist • Kitchen hood service and maintenance value investments: The combined com- become an executive vice president of suppression systems • CO2 system maintenance and recharge pany will hold approximately 23 billion ConocoPhillips and president of the barrels of oil equivalent resources with company’s Lower 48 business. He will an average cost of supply of below $30 report directly to ConocoPhillips per barrel WTI.” (907) 336-5000 Chairman and CEO Ryan Lance. —KAY CASHMAN gmwfireprotection.com “Concho is a tremendous fit with ConocoPhillips,” Lance said. “Together, ConocoPhillips and Concho will have

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This communication was paid for by OneALASKA - Vote No on 1, Anchorage, AK. Chantal Walsh, chair, approved this message. Top three contributors are BP Alaska, Anchorage, Alaska, ConocoPhillips Alaska, Anchorage, Alaska, and ExxonMobil, Anchorage, Alaska. PETROLEUM NEWS • WEEK OF OCTOBER 25, 2020 9 continued from page 1 statutory authority of allowing bonds to be required to ‘plug gas must P&A wells before expiration of rights in the prop- each dry or abandoned well or the repair of wells causing erty, “it does not appear the Commission had the authority AOGCC DENIAL waste,’” Gottstein said. to promulgate such a regulation.” He said the Burglin “well is a valuable DNR asset and it Revised bonding January hearing is believed was a significant factor in DNR’s ability to lease The commission revised its bonding requirements for In a Jan. 22, 2020, letter to the commission — the day the property at least twice since ADL 318613 expired. plugging and abandoning wells in May 2019 and advised prior to a Jan. 23 reconsideration hearing — Gottstein reit- Alaskan Crude does not believe it has authority to enter on existing operators of record of additional bonding amounts erated the ex post facto argument from his July 23, 2019, the property to plug the well, in any event,” he said. “To my required under the new regulations. letter, as well as the assertion that the new regulations knowledge, DNR has not requested that their suspended Alaskan Crude Corp., the operator of record for the exceed the agency’s statutory authority. well be plugged and abandoned, or specified how DNR Burglin 33-1, Katalla KS-01 and Mike Pelch 1 wells, was At the Jan. 23 hearing, Gottstein told the commissioners plans to pay for the plugging and abandonment of their well advised by the commission that its existing $200,000 there is another problem: you can’t, he said, really tell what that is in suspended status.” statewide P&A bond was being increased to $1.2 million the new regulation means. Gottstein said the Katalla well was not drilled on a DNR ($400,000 per well), with the additional $1 million due in Referring to the language of the new regulations, he lease. It is the property of the landowner and Alaskan Crude two annual $500,000 installments. asked if the bond providing security to ensure that wells are does not have authority to enter the property or plug the Alaskan Crude’s attorney James B. Gottstein requested drilled, operated, maintained in accordance with the regula- well, he said. reconsideration in a July 25, 2019, letter, objecting to the tions means that any deviation would result in the bond The Pelch well is also on private property, Gottstein said. increase. being seized? He noted that the commission’s regulations “It has a permit and permission to be re-entered and re- He told the commission it was not legal under the Alaska require that every well must have a sign identifying it in a worked so plugging and abandoning that well is prema- Constitution “to increase the bonding/security requirements conspicuous place — if that is violated, would be bond be ture.” for existing permit holders,” calling the increased bonding seized, he asked? Gottstein also noted that Alaskan Crude filed for bank- an illegal ex post facto law as applied to the three existing What does it mean that the well must be operated in ruptcy in 1990. “It is my understand that all three wells wells. accordance with the commission’s regulations — does any were drilled prior to this,” he said. Alaskan Crude Corp. “as “Second,” Gottstein said, “the new regulations go deviation trigger a seizure of the bond, he asked. currently constituted is a completely different entity than beyond the scope of the authorizing statute.” the Alaskan Crude Corporation that drilled the wells and The commission’s statutory authority, he said, quoting Future plans for wells had the plugging and abandoning requirement,” Gottstein statute, allows it to require “the furnishing of a reasonable At the Jan. 23 hearing the commission asked the compa- said. bond with sufficient surety conditions for the performance ny to provide future plans for the three wells. He requested that the record be kept open until he of the duty to plug each dry or abandoned well or the repair Gottstein said in a Feb. 19 letter that the Burglin well is returned to the state and could examine the bankruptcy file. of wells causing waste.” on a Department of Natural Resources lease, ADL 318613, He subsequently asked the commission to make bankruptcy The new regulation, he said, quoting the commission’s which was terminated in 1990. He said the Burglin well paperwork available; the commission said in its Oct. 15 regulations, requires “security to ensure that each well is then became property of DNR and Alaskan Crude had no decision that any bankruptcy paperwork in its files would drilled, operated, maintained, repaired, and abandoned and more responsibility. be available online. each location is cleared in accordance with this chapter.” He said that while the commission’s regulations provide “It is apparent the new regulations go far beyond the that someone having the right to drill and produce oil and see AOGCC DENIAL page 11 Oil Patch Bits

Jeff Raun joins EXP to strengthen Alaska presence and developing sustainable regulatory strategies. “EXP’s role in Alaska is focused on delivering services to improve the EXP, a global leader in engineering, architecture, design and consulting, resiliency of our client’s resource projects. We are very excited to welcome Jeff said Oct. 16 that it is excited to welcome Jeff Raun as senior environmental to the team, enhancing our efforts to consistently exceed client expectations. project manager, based in EXP’s Anchorage office. Raun has more than 15 Jeff brings the expertise, leadership and global knowledge to advance environ- years of experience serving in environmental and regulatory roles. Most mental solutions for complex projects and help drive EXP’s sustainable initia- recently, Raun held various positions at ExxonMobil, where he worked on tives.” international oil and gas projects, conducting global exploration activities. In EXP has been a part of the North American energy industry, including his new position, Raun will be responsible for managing and developing envi- Alaska, for over 40 years. Led by Vice President Chris Humphrey, the EXP team ronmental permitting and regulatory compliance projects in and outside of has been delivering effective environmental and regulatory permitting services Alaska and advancing strategies to support EXP’s low carbon energy transition for oil and gas projects in Alaska, including the ongoing Alaska LNG project. JEFF RAUN Companies involved in Alaska’s oil and gas industry

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Colville Inc. Lynden Inc. All of the companies listed above advertise on a regular basis Computing Alternatives Lynden International with Petroleum News 10 PETROLEUM NEWS • WEEK OF OCTOBER 25, 2020 continued from page 1 age of $500,000 each for 12 wells and an exclusively dedicated to the plugging and said that reduction was based on a $324,000 average of $150,000 each for 40 wells. abandonment of a well or wells” in place bond in place with the U.S. Environmental BONDING REDUCTIONS Under the proposed change, which for with the landowner or a bond or security in Protection Agency dedicated to P&A of two 21-40 wells is $6 million, the required place with the U.S. Environmental disposal wells. for 40 or fewer permitted wellheads. bonding averages $285,714 for 21 wells, Protection Agency which is dedicated to For one to five wells, the new bonding Hearing scheduled dropping to $150,000 for 40 wells — the P&A of disposal wells. requirement is $400,000 per well; for six to same average as the bonding amount for 40 These changes reflect decisions the com- The commission is also extending the 20 wells, $2 million plus an additional wells as the 2019 regulations. time for installment payments on increased $250,000 for each well above five; for 21 to mission made earlier in the year. The bonding for more than 40 wells is In responding to an appeal from AIX bonding amounts from 4 years to 7 years. 40 wells, $6 million. A hearing is scheduled on the proposed Bonding amounts for more than 40 wells unchanged: at $10 million for 41-100 wells, Energy for a reduction in bonding, the com- the bonding cost is an average of $243,902 mission reduced required bonding based on changes for Nov. 4 at the commission’s remain unchanged. Anchorage offices. The hearing is sched- each for 41 wells, dropping to an average of a $950,000 certificate of deposit in place uled from 10 a.m. to 2 p.m. and may be $100,000 per well for 100 wells. with the Mental Health Trust Land Office Increases adopted in 2019 extended to accommodate those present The required $20 million in bonding for The per-well impact of the increase in which is dedicated to P&A of AIX’s four before 10:30 a.m. who did not have an 101 to 1,000 wells averages $198,000 per bonding which the commission adopted in wells. opportunity to comment. well at 101 wells, dropping to $20,000 per May 2019 is greatest for operators with the The Trust Land Office is the landowner If COVID-19 necessitates that the hear- fewest number of wells, and that continues well at 1,000 wells. at the Kenai Loop field where AIX’s wells ing be held telephonically, phone lines will to be true under the proposed changes. The $30 million in bonding required for are located. In its AIX decision the commis- be available at 9:45 a.m., at 1-800-315- With the proposed changes, the required more than 1,000 wells averages $29,970 per sion denied the company’s request for a 6338, code 14331. bonding for an operator with one to five per- well for well number 1,001 and drops from reduction in bonding based on a bond with Written comments may be submitted at mitted wellheads continues to be $400,000 there $15,000 per well at 2,000 wells. the Alaska Department of Natural the hearing; the commission will also accept per well. Resources for dismantlement, removal and written comments through Nov. 20 at 4:30 With six wells, at the $2 million plus Existing bonds restoration, saying the $500,000 DNR bond p.m., by mail, fax or electronic mail at $250,000 per well requirement, the average The commission’s bonding regulations “is for the DR&R of the surface of DNR’s [email protected]. drops to $325,000 per well, and the average say it may increase or decrease bonding leases to a condition acceptable to DNR. No The notice and proposed regulation bonding for 20 permitted wells drops to based on engineering, geotechnical, envi- evidence was offered that any of that bond changes are available at: https://www.com- $287,500 per well. ronmental or location conditions which is irrevocably restricted to the costs to prop- merce.alaska.gov/web/aogcc/Events.aspx. l The original bonding requirement of $6 warrant adjustment. erly P&A AIX’s wells.” million for 11 to 40 wells averaged It proposes to add two other conditions: In a decision reducing bonding required $545,455 for 11 wells, dropping to an aver- “a bond and, if required, security that is from Energy the commission

continued from page 1 geology. energy sector might find a home in a have at least two large LNG projects But Savage emphasized that a geother- green and clean solution.” exporting energy, be a continental leader ENERGY DIVERSITY mal policy does not mean oil and gas is Energy Futures, a partnership of gov- for plastics recycling and host large-scale fading fast, noting that energy forecasts ernment, industry and academia, has been hydrogen production facilities, creating power, along with its relatively low cost have fossil fuels continuing to dominate working on advancing geothermal pro- and small carbon footprint make it an tens of thousands of jobs in the process the world energy mix for 30 years. attractive power source as part of the duction in Western Canada for five years. “A lot of this is just getting govern- She said that developing Alberta’s full green energy transition. Juli Rohl, a geologist with Energy ment out of the way, speeding up geothermal potential also “feeds into the Energy Minister Sonya Savage said Futures, said the partnership is working approvals and creating investor certain- narrative that Alberta is taking green- geothermal legislation will ensure Alberta on a project to understand how an Alberta ty,” he said. “Most of what we’re talking house emissions reduction seriously.” has the regulatory and investment climate First Nation can repurpose inactive gas about actually won’t cost the taxpayers a Savage said a guiding set of regula- to make it competitive with other jurisdic- wells to heat a greenhouse and help pro- dime.” tions will offer investors a predictable tions. vide economic and food security for its Atco Chief Executive Officer Nancy regime instead of current approvals on a The government said geothermal pres- community. Southern said the immediate challenge case-by-case basis. ents a way to repurpose inactive oil and involves scaling up commercial hydrogen Bailey Schwarz, a lead engineer at gas wells for heat and power production, Hydrogen export more distant production and delivering natural gas Alberta-based Eavor Technologies, said it aided by the fact that oil rigs are flexible The export goals for hydrogen are from carbon capture — a process she said is rewarding to see that drilling technolo- enough to be used in geothermal drilling, more distant, but much grander than geot- is “still five to six years away.” gies “designed for the more traditional boosted by Alberta’s geothermal-friendly hermal, although the initial steps are lim- “We do have to crack the carbon cap- ited to building a string of 20 small-scale ture nut on a commercial level. But we’re projects and investments of C$58 million. very, very close,” she said. Beyond that plan, the Alberta govern- continued from page 6 ment opportunity for the activities con- sidered for authorization under its Oct. ment hopes to reduce carbon emissions NDP also looking at hydrogen STORAGE WELL 16 decision. The following agencies by 1 million metric tons a year, or the The New Democratic Party, soundly were notified on Sept. 16 for comment equivalent of removing 750,000 cars defeated by Kenney’s United Cook Inlet basin. The new gas storage on the plan: Alaska Department of from the road. Conservative Party in 2019, is exploring well and its related infrastructure will Environmental Conservation; Alaska “Unlocking innovation across our nat- the feasibility of a hydrogen pipeline support continued natural gas storage Department of Fish and Game; DNR’s ural gas sector will create jobs while help- costing about C$350 million as part of a for the field. Division of Mining, Land & Water, ing the industry become more efficient,” plan to grow the province’s participation The new well will be drilled into U.S. Army Corps of Engineers and said Associate Minister of Natural Gas in the energy source. state of Alaska oil and gas storage lease Bureau of Land Management. Dale Nally. NDP leader Rachel Notley rolled out ADL 390821. The comment deadline was 4:30 He said that by 2050 Alberta estimates 11 proposals including government loan Drilling activities are expected to p.m. Alaska Time on Sept. 30. No com- hydrogen could be a US$3.5 trillion glob- guarantees for pipeline infrastructure, begin around Oct. 18, with tie-in and ments were received. al industry, but the Hydrogen Council, a production hubs and commercial applica- construction work completed by The approval expires on Oct. 16, global corporate group, has lowered its tions, as well as royalty credits to attract approximately Dec. 11, 2020. 2023, if work on the project has not sights to US$2.5 billion over the same large hydrogen projects. All activities will be done on the pad started. period. That includes the creation of a task and will tie into existing gas storage —KAY CASHMAN Alberta Premier Jason Kenney said force to build a case for exporting hydro- infrastructure. Calgary-based utility Atco plans to build gen to markets in South Korea, Japan and The division, which is part of the a pilot project that will convert natural California. Alaska Department of Natural gas and hydrogen into a source of home Notley said the NDP aims at taking Resources, provided a review and com- heating. advantage of a “generational economic Within a decade, he said Alberta could shift” by producing what is known as blue hydrogen — using natural gas and exist- ing carbon capture and storage facilities — to start exports in 2040. **)!/) !,-.) - '-&!..!, She said the Kenney government’s          plan is too vague and fails to offer any ,*%! . !-$")) )"!(!).4!"/'.*,32+!,.$-!4) $ !).!-+*)-!4 *)-.,/ .$*)0!,-$"#.4$..!-.*,.$*) industry incentives, unlike Australia and Germany. A spokesman welcomed “ideas from others,” but said it was hard not to note that Notley, while she was premier from 2015 to 2019, “did nothing” on the devel- opment of hydrogen. —GARY PARK *). .  */"*#)-*)441111!-.*)-*'/.$*)- *(Rick Farrand (907) 343-2705

Providing integrated environmental and engineering solutions for the oil and gas industry ® PETROLEUM NEWS • WEEK OF OCTOBER 25, 2020 11 continued from page 1 tion cuts in effect now, to 5.8 million bpd. However, three sources from producing OIL PRICES countries said a planned output increase from January could be reversed if neces- tinue into 2021, according to a Rystad sary, Reuters said in an Oct. 19 report. Energy forecast for shale oil, gas production OPEC’s monitoring committee said in and capital investments released Oct. 21. an Oct. 19 release that the economic recov- Activity levels and output in key con- ery has slowed due to the resurgence of tributing shale plays are “anticipated to COVID-19 cases in major economies, par- show notable decline” in 2020 and 2021 as ticularly in the Americas, Asia and Europe. well, Rystad said. The committee told all participating “Since the downturn that prevailed countries to be mindful of “the necessity to between 2014 and 2016, LTO production be vigilant and proactive given the precar- in the region has revamped with a new ious market conditions and prospects.” force, able to adjust to a depressed price Saudi Arabia Energy Minister Prince environment through high grading of Abdulaziz bin Salman said OPEC has acreage and considerable cost and produc- been flexible during the pandemic, adapt- tivity improvements,” Rystad said. ing “to changing circumstances when In 2019, oil output reached 8.6 million required.” barrels per day, representing a year-on- Accommodative statements may be the year growth of about 20%, it said. only tool to assuage oil markets for the In 2020, the pandemic-induced global next month or so. While OPEC+ ultimate- oversupply and oil demand destruction ly may not ease the production cuts in hammered oil prices, and North American January, the decision won’t actually be producers cut capital budgets and trimmed made until the full group meeting which back drilling and completion programs, ment and a focus on capital discipline,” President Vladimir Putin and Saudi will be held Nov. 30 and Dec. 1. focusing on cash flows and returns, Rystad Rystad said. Crown Prince Mohammed bin Salman had The price of OPEC basket of thirteen said, adding that many producers were In 2021, Rystad estimates that West a telephone conversation Oct. 13 to dis- crudes stood at $41.04 per barrel Oct. 20, forced to curtail production volumes in Texas Intermediate crude prices will cuss crude oil markets, followed by a sec- compared with $41.38 the previous day, addition to taking frac holidays and cutting recover sharply, nearing $70 per barrel, ond call Oct.17, the Middle East Monitor according to OPEC Secretariat calcula- the number of rigs and frack crews. leading to an upward trajectory in activity reported. tions. Rystad said production shut-ins and and oil production in 2022 that will take According to statements by the crude closed down restricted flowbacks on wells peaked in North American light tight oil production Kremlin, the two leaders exchanged views 8 cents at $42 Oct. 20. WTI closed up 63 May, when many operators began to return to 13.6 million bpd by 2030. on the progress of the OPEC+ agreement, cents at $41.46 Oct. 20, but it slipped curtailed volumes as oil prices improved. “The Permian Basin will be the major and agreed to continue coordination in below $40 in trading Oct. 21. Brent closed “We expect that majority of curtail- contributor to expansive growth going for- order to maintain stability in the crude up 54 cents to 43.16 Oct. 20, but in trading l ments have been returned online by the ward with Permian Delaware also remain- market. Oct. 21 it fell to $41.73. end of August 2020,” it said, adding that ing the most resilient play during the ongo- OPEC+ for now is sticking with its plan oil production increased over the summer ing downturn,” Rystad said. to ease oil production restrictions in Contact Steve Sutherlin at [email protected] due to shut-in reactivations and higher lev- January, from the 7.7 million bpd produc- els of completion of already drilled wells. Saudi/Russia axis New drilling activity remains low, how- Despite a pair of high-level discussions ever, leading Rystad to conclude that oil between Saudi Arabia and Russia, the A special offer from Petroleum News! output will decline again in fourth quarter Organization of Petroleum Exporting 2020, falling to 8.2 million bpd this year Countries and allied nations made no and to 7.7 million bpd in 2021. changes in the OPEC+ oil production Fall Season

page “Producers are poised to keep activity strategy following its ministerial monitor- August ANS down marginally; 5 Cook Inlet Vol. 25, No production off by 2% . 40 • www.PetroleumNew s.com A weekly oil & g as newspaper based in Anch orage, Alaska Week of October 4, 2020 • $2.50 l Latest Arctic D E X P L O R A T I O N & P R O levels low amid uncertain market environ- ing committee meeting Oct. 19. irectory released D U C T I O N Mustang Arctic Oilil & Gas Directotory plan filed Covering Arctic oil and gas operations and th O Sale! con e logistics, il production s f truction and service firms th rom the Nor at support them th Slope Southern M iluveach unit to start 3Q 2021 By KAY CASHMAN Petroleum N BRPC/Finnex ews said the Mustang project lost a year in n Oct. 1, its planned development operator Brooks Range Pe C troleum schedule, “but the pr O orp., or BRPC, and Finnex oject remains LLC filed the eighth annual plan o fundamentally sound and (capa f development for the ble) of Southern Miluveac being br h unit on behalf of the work ought to fruition.” Purchase a one year Petroleum interest ow ing ners with Alaska’s Divisi G on of Oil and as. Sustained oil produc o tion from the unit’s n Sept. 16 the Alaska Indus Mustang field is pl trial Development and anned by third quarter of n Export Authority p year. ext assed a resolution approving commission said, which was approved in negotiatio the n and executi continued from page 9 The eighth PO on of a debt settlement D, which will run from J restructuring Dec. 3 an. 1 to agreement, or DSRA, and a 1, 2021, takes up where w the uthorized ork in the 8,960- sale of the Mustang oil field acre, five-lease, unit le leases to Finnex. ft off in December 2019. Finnex is the spec Note: As prev ial purpose vehicle, or SPV News subscripon, and receive iously reported in Petroleum , News, August 2018. “As of the date of this see MUSTANG PLAN page 9 l E X P L O R AT I O N & P R O D U C T I O N Vol. 25, No. 2 AOGCC DENIAL order, Burglin 33-1 has not been plugged October 2020 BlueCrest’s 7th a gi subscripon for just $1! Parks redo h POD ang s on offshore O&G; Maintain production; trident fis Rivalry for o hbone well on hold until price il investment heats up s firm up CONSERVIN By STEVE SUTH G NATURAL RESOU ERLIN RCES Each trident fishbone has “long been tie Petroleum News well, built on the d to and directly support- company’s su and abandoned. In addition to the bond ed by o ccess with its single fishbone il and gas development in w the United lueCrest Ala ells, will “provide the same States,” Walter Cruicksh ska Operating LLC will amount of ank, Ph.D., acting imp reservoir contact director of Int B lement well work in order to m as 21-27 individual erior’s Bureau of ain- Ocean tain production u wells.” J. Benjamin Johns Energy Management, nder its seventh plan of on, BlueCrest wrote in a recent developm Energy CEO and release. ent for the Cosmopolitan un president told Petroleum it, in News in effect from Jan. 1, 2021, thro 2019. required, the AOGCC reserves the right “This may seem counterintu ugh Dec. 31, Sign up today! itive to some, 2021. A complet Commission decision e w ell plan stan but offshore energy dev ds ready for elopment revenues In a Sept. 2 the company’s pro from qualifie 5 letter to the Alaska posed H10 trident well, d leases go right back into J. BENJA Johnso t conservation initia- Department of Natural Reso MIN JOHNSON n said in a Sept. 29 interview ives throughout the United urces Division . States via the Land of Oil a “It’s on ind Conserva and Water nd Gas, BlueCrest said plans efinite hold. We’re ready to tion Fund,” Cruickshank sa in its sixth POD go but we’re w id in the story, which to drill at least one triden aiting to have some confiden was first published by The t fishbone well in 2020, price ce in oil to pursue enforcement action in connec- Vindicator. which were dela s,” he said. “It’s a moving ta Established in yed due to COVID-19 oil m rget; the oil prices 1964, the LWCF supports disrup arket are down but costs hav local la federal, state and tions, will remain on hold f e also come down.” In its Oct. 15 decision, the commis- nd, water and wetlands pur or 2021 “until the The company said t chases to curr acces expand public ent market environment impr he pause in drilling has s to public lands, “so more oves.” Americans can experience see BLUECREST page 10 CONTACT see INSIDER page 11 l tion with the failure to properly plug and FAC I L I T I E S Russia’s n sion reviewed evidence presented by ew nuclear icebreaker complete d, heads to Murmansk Trump Construction o bolsters A2A f the Arktika, Russia’s n breake ewest nuclear ice- r, has been completed and th abandon Burglin 33-1.” e vessel is heading from St. Sa Petersburg to Murm ys will issue presi Renee Garbutt I 281-978-2771 ansk, according to Rosatom dential permit for Al State aska Energy Corp. Atomic -to-Alberta import a ACC and stated the following conclu- Russia claims that the new nd export line ves largest sel is the world’s By nuclear icebreaker. Rosato GARY PARK In m reports that the vessel is mid-2019 A2A announced 173 meters in length, w For Petroleum it had reached an ith a displacement of 33,54 News agreement with the A nuclear react 0 tons. Two laska Railroad Corp. to deve ors power the vessel’s propu a joint op lop se lsion system. The ves- rom th erating plan to upgrade and e l is the first of a series of fou e time it was floated five yea xtend the 515- —KRISTEN NELSON r similar icebreakers, planne rs ago, the lat- mile Alaska Railroad ma be built in d to est version inline between Sewa [email protected] a program referred to as “pro F of an Alaska-Alberta rail l Nort rd and ject 22220.” ink has h Pole. sions in denying the request for reconsid- bee n o The Barents Observer has r penly scorned by many and eported that one of the vess quietly given the Apparently the meg three electrical propu el’s brush off by others. a-undertaking has attracted lsion engines is broken and w the attentio replaced. ill need to be For n of President Donald T 130 years, various proposals rump, who have been made announced on Sept. 25 that Russia’s particular focu for such a project to he would issue a presi- s is the operation of bolster imports and dential route, t the Northern Sea exports in permit for the A2A project, a he Arctic route around the n Alaska and Western Canad permit which the orth of the country, linking a and have just as quickly president signed Sept. 28 eration: the Baltic Sea with South evaporated in . Korea and the the absence of co north Pacific. With the financial backers. The plan involves build ntinuing shrinkage of the Ar But the idea ing a 1,600-mile track ctic sea ice extent and thinnin keeps resurfacing as a seriou linking Anchor the ice, there is intern g of m s plan to age, the Yukon, the No (Gift subscriptions must be used toward ational interest in the potent ove oil and other resources Terri rthwest ial for to and tories a opening from the Pacific nd northern Alberta at a curr Basin through Alaska. ent cost esti- see ICE mate of C$22 billion, wit BREAKER page 11 Th h Alberta’s oil sands bitu- e current proposal involves men exports b a venture by the eing carried by rail to Interio The commission said it “is authorized Alaska to Alberta Ra r Alaska, ilwa y Development Corp., A2A. new subscribers. Special offer ends Dec. 31) see A2A RAILWAY page 10 to require a bond for the performance of the duty to plug wells and the duty to repair wells causing waste. Every opera- tor is required to have a bond in place to ensure compliance with those duties. Any bankruptcy that occurred in 1990 cannot remove subsequent bonding obli- gations.” Since ACC is the operator of record for the Burglin 33-1, Katalla KS-01 and Mike Pelch 1 wells, it “is required to have a bond in place for all three wells,” the commission said. It said ACC has not provided written documentation of any change of operator for any of the wells, so remains the oper- ator of record “and is responsible for the plugging and abandonment of the wells.” The commission said ACC has not pro- vided any evidence “to support is asser- tion that it is prohibited from plugging and abandoning any of the wells,” and without written proof that landowners have pro- hibited it from entering the properties to P&A the wells “or that the landowners have agreed to assume responsibility to plug and abandon the wells, ACC remains responsible to do so.” ACC submitted an application to abandon Burglin 33-1 in Jul 2018, the 12 PETROLEUM NEWS • WEEK OF OCTOBER 25, 2020

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