page With 200 installed, rural Alaska 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 Concho Resources 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.