Oil pipeline

Climate change may now be a factor in declining North Slope oil production. Arctic regions of Alaska, which include the state’s major petroleum-producing regions, have experienced the five of the warmest winters on record, with average temperatures 5.8 degrees Fahrenheit above the long-term winter average. The Arctic is warming at rates twice as fast as in more latitudes further south, scientists say.

Warmer winter temperatures affects the efficiency of oil processing plants and for 2019 year-to-date oil production is running 14,000 barrels per day below the same period of 2018. That’s according to data from the Alaska Department of Revenue. Alaska still depends on oil royalties and taxes for much of its revenue, so the state pays close attention to oil production. North Slope production has averaged 487,537 barrels per day from January through August compared with 501,587 barrels per day for the same period of 2018.

Another factor this year are maintenance schedules across several fields this year. “We have had several (maintenance) turnarounds at facilities and TAPS in the last month or so,” said Jim Beckham, acting state oil and gas director. At the Nikaitchuq field (operated by Eni Oil and Gas) maintenance work on a subsea production pipeline required shut-in of production wells over a two-month period,” this spring, Beckham said. Production from the large Prudhoe Bay field dropped to 189,515 barrels per day in August from 256,388 barrels per day in July, according to the revenue department data.

Meg Baldino, spokesperson for Prudhoe operator BP, said major plant maintenance work was done in August was a factor.

“BP had planned maintenance at Prudhoe Bay this summer,” she said. “The work is focused on piping replacements, facility maintenance and other improvement projects.”

Beckham also said the gradual production decline in mature fields is no surprise. “A year-on-year decline of existing production is generally expected for individual fields unless stemmed by new production and aggressive well maintenance operations,” he said. There are two new producing projects on the slope in the first half of 2019, ConocoPhillips’ GMT-1 in the National Petroleum Reserve-Alaska and Hilcorp Energy’s Moose Pad in the Milne Point field, but the new production is not yet enough to offset the declines in other fields.

The North Slope fields has historically seen annual declines of five percent to six percent although production has been held generally at about 500,000 barrels per day in the last two years. Beckham said the average for the 2018 calendar year was 512,000 barrels per day, and despite the lower production year-to-date 2019 may wind up looking better by December. “Prudhoe Bay is actually holding steady when you compare the first half of 2019 to the average across 2018, and it’s possible it may exit the year in that fashion,” he said. Prudhoe still accounts for over half of total ANS output.

“The Kuparuk field is down by about 6 percent over the same period,” he said, but that may be explained by lower production from the small Oooguruk field, which is counted in the Kuparuk total. “Oooguruk has just undergone a change in ownership and drilling activities were curtailed last year prior to that change in ownership,” Beckham said.

There is some new oil production this year. Hilcorp Energy began operations at “Moosepad,” a new production site in the Milne Point field near Prudhoe Bay, and production there is expanding. ConocoPhillips is also producing new oil at GMT-1, a site in the National Petroleum Reserve-Alaska, a large federally-managed area west of the large producing oil fields of the slope, which are on state-owned lands. Moosepad and GMT-1 aren’t enough to offset the broader decline so far this year, however.

Despite the near-term decline the North Slope operators are doing exploration and expect to see even more new production. ConocoPhillips’ Fiord West, a project in the Kuparuk, will be producing in late 2020, with about 20,000 barrels per day of new oil at its peak. GMT-2, now in construction, will be producing by 2021. It will add about 40,000 barrels per day of new production.

By 2025 and 2026 two large new fields are expected to be on-line. These include “Pikka” being developed by Oil Search, of Papua New Guinea along with its partner Repsol, based in Madrid, and Willow, being planned by ConocoPhillips. The two are expected to add about 250,000 b/d of new production, with Pikka operating by 2024 and Willow by 2025 or 2026.

In the long run, however, climate change will continue to enact a toll. Besides making processing plants less efficient, warmer winters also impede oil companies in building winter ice and snow roads to drill exploration wells and in serving remote “roadless” fields. In the long run, gradual warming will create unstable permafrost, creating problems for production infrastructure built on the land surface. Many changes that can be expected are spelled out in a new report from the University of Alaska’s International Arctic Research Center, “Alaska’s Changing Environment,” by scientists Rick Thorton, John Walsh and Heather McFarland.

The Department of Revenue production data is drawn from the volumes of processed liquids, crude oil as well as natural gas liquids, metered as they are shipped through pipelines and reported to the revenue department. Fluids from small satellite fields are co-mingled with those from large fields when shipped through pipelines but are allocated by the state for tax and royalty through test measurements.

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