l finance & economy a changing world - … · l finance & economy vol. 23, ... alaska week...
TRANSCRIPT
Lalicker takes over as Hilcorp CEO;Hildebrand remains executive chair
page3
l P I P E L I N E S & D O W N S T R E A M
l N A T U R A L G A S
l F I N A N C E & E C O N O M Y
Vol. 23, No. 8 • www.PetroleumNews.com A weekly oil & gas newspaper based in Anchorage, Alaska Week of February 25, 2018 • $2.50
Western & central North Slope,Nanushuk excite investors at NAPE
Although bested by the excitement of
ANWR possibly opening to oil and gas
exploration, the rest of Alaska’s North Slope
also received some solid attention at the
recent NAPE Summit in Houston.
That shouldn’t be a surprise because the
western, not the eastern, North Slope holds
the hottest proven exploration play in North
America — the Nanushuk formation. The
area is already open to exploration and development and will
certainly be far less subject to lawsuits from the environmen-
tal community.
In addition to being the hottest play, the Nanushuk and
Torok geologic clinothem is the largest of its type in the
world.
A recent new assessment of the National Petroleum
Reserve-Alaska across the Colville River to the west dramat-
ically boosted technically recoverable undiscovered oil
reserves. Conducted by the U.S. Geological Survey and
Hilcorp permitting Seaview pad onKenai Peninsula south of Anchor Pt.
Hilcorp Alaska has applied to the Alaska Department of
Environmental Conservation to amend its Cook Inlet oil dis-
charge, prevention and contingency plan to add a new pad,
Seaview, on the Kenai Peninsula near Anchor Point. Hilcorp
said the pad location is some 1.25 miles east of Cook Inlet and
some 1.2 miles south of Anchor Point’s main business district.
It is some 850 feet west of the Anchor River and 2,000 feet
west of the Sterling Highway.
Hilcorp permitted and drilled seven shallow stratigraphic
test wells in the area over the summer, both on state oil and
gas lease acreage which the company holds and on fee lands.
Hilcorp said access to the proposed Seaview pad is from an
all-season gravel road which connects to the Old Sterling
Highway, some half mile to the west, which connects to
Sterling Highway some 1.25 miles to the north.
The company said it plans to construct the Seaview pad in
the second quarter of 2018. The pad will include drilling
equipment and work trailers, Hilcorp said.
On the issue of blowout concerns, the company said if a
$10 million in supplemental forANWR 1002 area seismic shoot
The administration has requested $10 million in the supple-
mental budget to allow the Alaska Department of Natural
Resources to participate in acquiring seismic data in the 1002
area of the Arctic National Wildlife Refuge, in anticipation of
federal lease sales in the area.
In the request the administration noted that the federal gov-
ernment has recently opened the 1002 area of ANWR to oil
and gas leasing, exploration and development.
“Availability of seismic data will improve interest in
exploring for oil and gas within the 1002 area,” the funds
request says. “This funding allows the state to work with other
interested parties to provide seismic data which will enhance
state revenue from lease sales and decrease time to drilling
and production.”
In a presentation of the supplemental budget in the Senate
Finance Committee Feb. 19, Office of Management and
Budget Director Pat Pitney said $10 million doesn’t go a long
way in seismic acquisition. The state gets 50 percent of
A changing worldBP Energy Outlook assesses the transition to an evolving energy future
By ALAN BAILEYPetroleum News
The BP Energy Outlook for 2018, published on
Feb. 20, predicts growing global energy
demand as standards of living improve in the
developing world, particularly in China and India,
but with Africa also factoring into this trend later
in the outlook period. Natural gas usage will grow
steadily in response to that demand, while the use
of renewable energy sources, especially wind and
solar, will likely increase rapidly.
In China in particular, renewables are expected
to overtake oil as an energy source by the end of
the period, However, global demand for oil will
probably remain robust for many years into the
future, the Outlook suggests.
The energy transitionThe Outlook considers what it characterizes as
the energy transition, the manner in which the evo-
BC pipe case weakensDilbit found to float on water for up to 3 weeks; premier says it would be studied
By GARY PARKFor Petroleum News
As the Canadian pipeline war of 2018 moves
toward a pivotal decision, which it is widely
assumed will see the federal government of Prime
Minister Justin Trudeau ordering work to proceed
on Kinder Morgan’s expansion of its Trans
Mountain export system, the underpinning of the
British Columbia government case against the
C$7.4 billion project is weakening.
In igniting the flareup between his province and
Alberta on Jan. 30, B.C. Environment Minister
George Heyman effectively placed a ban on
increased diluted bitumen, or dilbit, shipments
across his province pending more studies on the
impact of dilbit spills.
Sources within the B.C. government said that
declaration caught Premier John Horgan off guard
and unprepared at a time when he was on a trade
mission in Asia.
On his return, Horgan showed the first signs of
softening his government’s hard line.
“It’s never been my intention” to ban bitumen
first, then study the issue, he said, although he has
not ruled out limiting shipments at some later point
after study and consultation with the public.
However, Alberta Premier Rachel Notley has
refused to give B.C. the time to clarify its position
so long as it subverts federal trade rights.
She has startled her opponents by taking a
tough, unyielding stance, starting with a freeze on
FERC wants more infoAGDC finished 801 questions in January, now has 289 more, some previously asked
By KRISTEN NELSONPetroleum News
The Alaska Gasline Development Corp. said in
January that it had completed answering 801
questions posed by the Federal Energy Regulatory
Commission on AGDC’s application for a Natural
Gas Act Section 3 permit for the Alaska LNG proj-
ect. The application was submitted last April.
AGDC noted in its Jan 22 statement that FERC
said in December that when it had all the informa-
tion it would issue a notice scheduling the environ-
mental review and the date when a final environ-
mental impact statement would be issued.
“AGDC expects FERC will determine they now
have the information necessary to complete their
analysis and will soon publish a schedule” in the
Federal Register outlining activities leading up to
the final EIS, AGDC said in January.
But on Feb. 15 FERC sent another data request,
this one with 289 questions.
“This enclosure includes several requests for
information that have been made multiple times
during the pre-filing review phase, as well as in the
current application review, for which an adequate
response has not yet been received,” FERC said,
adding, in bolded text: “You should be aware that
the information described in the enclosure is nec-
essary for us to continue preparation of the draft
environmental impact statement.”
The FERC letter said there were also requests
based on information provided by AGDC since the
see INSIDER page 10
see SEAVIEW PAD page 9
see ANWR SEISMIC page 9
see BP OUTLOOK page 11
see PIPE CASE page 8
see FERC QUESTIONS page 11
Competition in energy markets willintensify because demand will slow as a
result of improved energy efficiency whiletechnical innovation will make more
energy available, the Outlook suggests.
2 PETROLEUM NEWS • WEEK OF FEBRUARY 25, 2018
To advertise: Contact Susan Crane at 907.770.5592
Petroleum News Alaska’s source for oil and gas newscontentsFACILITIES
FINANCE & ECONOMY
ALTERNATIVE ENERGY
ENVIRONMENT & SAFTEY
7 Kuparuk infrastructure upgrades approved
3 Lalicker takes over as CEO at Hilcorp
LAND & LEASING8 North Slope, Cook Inlet leases surrendered
2 Revised design for Grant Lake hydro
6 New ideas for dealing with oil spills
GOVERNMENT4 Simplifying the spill response planning
The state and federal governments are reorganizingregional contingency plans to simplify the planorganization and maintenance
3 EIA: US to be net energy exporter by 2022
Energy Information Administration ‘Annual EnergyOutlook 2018’; liquids, gas continue to grow through 2042, 2050, respectively
A changing worldBP Energy Outlook assesses transition to an evolving energy future
BC pipe case weakensDilbit found to float on water for up to 3 weeks
FERC wants more infoAGDC finished 801 questions in January, now has 289 more
ON THE COVER
Oil Patch Insider: Western & central North Slope,Nanushuk excite investors at NAPEHilcorp permitting Seaview pad on KenaiPeninsula south of Anchor Pt.$10 million in supplemental forANWR 1002 area seismic shoot
TMI?l E X P L O R A T I O N & P R O D U C T I O N
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l A L T E R N A T I V E E N E R G Y
Revised design for Grant Lake hydroFERC seeks public comments prior to preparing environmental impact statement for project near Moose Pass on the Kenai Peninsula
By ALAN BAILEYPetroleum News
The Federal Energy Regulatory Commission is
requesting comments on a revised design for a pro-
posed hydroelectric project at Grant Lake on the Kenai
Peninsula. FERC is going to prepare an environmental
impact statement for the project and anticipates publish-
ing a draft EIS in October and a final EIS in April 2019.
Kenai Hydro LLC, a subsidiary of the Alaska Electric
and Energy Cooperative, the business entity that oper-
ates power generation and transmission facilities as a
part of Homer Electric Association, is proposing to build
the hydropower system to help meet Homer Electric’s
goal for the use of renewable energy in the utility’s
power generation mix.
Near Moose PassGrant Lake is an L-shaped water body in the hills
above and to the east of the Seward Highway, where the
highway runs through the valley of Moose Pass, with
Grant Creek flowing from Grant Lake into Lower Trail
Lake, just south of the southern end of Upper Trail Lake.
Construction of the five-megawatt hydro facility would
involve diverting water from Grant Lake through a tun-
nel to a powerhouse near the outlet of Grant Creek
canyon, a natural rock canyon.
The project has raised numerous concerns about pos-
sible impacts on the Kenai River watershed. The historic
Iditarod Trail from Seward to Nome also passes through
the project area, a situation that has required discussions
over any conflicts with the trail route.
Although Kenai Hydro had at one time considered the
possibility of constructing a concrete dam at the outlet
end of Grant Lake, the company eventually settled on a
design which eliminates the need for a dam and places a
water intake below the level of the lake’s natural water
surface, to the east of the lake’s outlet into Grant Creek.
A bypass pipe to Grant Creek would enable the required
minimum flow rate in Grant Creek to be maintained.
The maximum drawdown of the lake, to feed the
hydropower system, would take place in the winter, with
the spring runoff subsequently replenishing the lake.
Kenai Hydro filed a license application for the project
with FERC in April 2016 and FERC subsequently con-
ducted scoping meetings and prepared scoping docu-
ments for an environmental impact statement.
Agency requestFERC says that in October 2016 the National Marine
Fisheries Service and the U.S. Fish and Wildlife Service
asked Kenai Hydro if it would be feasible to move the
bypass flow into Grant Creek to a point close to the out-
let of the creek from Grant Lake. The agencies said that
this bypass relocation would facilitate downstream eco-
logical processes with little impact on the project eco-
nomics or power generation capabilities.
During the winter of 2016-17 Kenai Hydro conducted
engineering and economic feasibility assessments for the
see GRANT LAKE page 3
By KRISTEN NELSONPetroleum News
The U.S. is projected to become a net
energy exporter by 2022, the Energy
Information Administration said Feb. 6 in
presenting the agency’s “Annual Energy
Outlook 2018,” which looks out to 2050.
That estimate is a change from last year’s
outlook, officials said, which projected
the country would be come a net energy
exporter by 2026.
The 2022 date is based on EIA’s refer-
ence case, which assumes trend improve-
ment in known technologies, an econom-
ic view reflecting leading economic fore-
casters and demographers and current
laws and regulations.
In addition to the reference case, EIA
evaluates high and low economic growth
cases, high and low oil and gas resource
and technology cases and high and low
oil price cases. The U.S. becomes a net
energy exporter in all but two cases — the
low oil and gas resource and technology
case and the low oil price case.
The U.S. became a net energy importer
in 1953, EIA said in the outlook, “but
declining energy imports and growing
energy exports make the United States a
net energy exporter by the early 2020s in
the Reference Case.”
What is the U.S. exporting and import-
ing?
EIA said most U.S. energy trade his-
torically has been in crude oil and petro-
leum products, with the U.S. remaining
both an importer and exporter of petrole-
um liquids through 2050 in the reference
case — primarily importing crude oil and
exporting petroleum products such as
gasoline and diesel. In the reference case
the U.S. remains a net importer of petro-
leum and other liquids, while U.S. natural
gas trade — historically receiving natural
gas by pipeline from Canada and sending
it by pipeline to Mexico — becomes
increasingly dominated by liquefied natu-
ral gas exports to more distant locations.
Energy productionWith energy production growth
dependent on technology, resources and
market conditions, production is more
sensitive than consumption to assump-
tions in the side cases, EIA said.
The reference case projects total U.S.
energy production to increase by some 31
percent from 2017 through 2050. This
increase is led by renewables, natural gas
and crude oil, with crude oil production
increasing only during the first 15 years
of the projection period, EIA said.
Total production is bounded by
resources, with, for example, the high oil
and gas resource and technology case
assuming higher estimates than the refer-
ence case for unproved Alaska resources,
offshore Lower 48 resources and onshore
Lower 48 tight oil, tight gas and shale
gas. EIA said that side case “also assumes
lower costs of producing these resources
and faster technology improvement,”
with the low oil and gas resource and
technology case assuming the opposite.
In the high oil price case assumptions
include higher world petroleum products
demand, lower Organization of the
Petroleum Exporting Countries’ upstream
investment and higher non-OPEC costs
for exploration and development, with the
low oil price case assuming the opposite.
Natural gasNatural gas accounts for the largest
share of total energy production in the
reference case, EIA said, with renewables
other than hydropower growing the most
on a percentage basis.
In the reference case natural gas pro-
duction accounts for nearly 39 percent of
U.S. energy production by 2050, EIA
said, with production from shale gas and
tight oil playa as a share of U.S. natural
gas production expected to continue to
grow because the assumed resource size
is so large.
“Natural gas prices are highly sensi-
tive to domestic resource and technology
assumptions explored in the side cases,”
l F I N A N C E & E C O N O M Y
EIA: US to be net energy
exporter by 2022Energy Information Administration ‘Annual Energy Outlook 2018’;liquids, gas continue to grow through 2042, 2050, respectively
PETROLEUM NEWS • WEEK OF FEBRUARY 25, 2018 3
Rig Mats Crane MatsAccess MatsComposite MatsCLT Mats Camp MatsDimension Lumber
Timbers & PilingTimber FabricationPressure TreatingRigid Foam - SIPSBoardwalksHelical PiersLogistic Services
PO Box 92688 Anchorage, Alaska 99509Office (907) 290-8031 Toll Free (844) 479-0763alaskamaterials.com [email protected]
agencies’ request. The company ultimate-
ly determined that the relocation of the
bypass flow would be viable and pro-
posed this option as the preferred design
for the hydropower facility. The company
subsequently filed an amendment to its
original FERC license application, to
incorporate the altered design. The new
design involves a pump system and a
weir structure at the outlet from the lake
and eliminates the bypass pipe in the ear-
lier design.
FERC is now seeking comments on
the amended design. l
continued from page 2
GRANT LAKE
FINANCE & ECONOMYLalicker takes over as CEO at Hilcorp
Greg Lalicker of Hilcorp Energy has taken over from founder
Jeffrey Hildebrand as chief executive officer of the company, the
Houston Chronicle is reporting.
A statement from Justin Furnace, the company’s corporate
director of external affairs, provided some details.
“It was announced internally in November 2017 that Greg
Lalicker would be assuming the role of Chief Executive Officer
at Hilcorp,” he said.
“The organizational change comes as the company, a long-
time producer in Alaska, Texas and Louisiana, continues to see
substantial growth in other legacy assets across the United
States.” Furnace said Jason Rebrook would take over from Lalicker as president, allow-
ing “Hilcorp to focus simultaneously on current asset development and potential future
growth.”
“Mr. Hildebrand will maintain his position as Executive Chairman and continue to
be heavily involved with the company.”
Hildebrand, a University of Texas graduate with geology and petroleum engineering
degrees, founded Hilcorp 1989 after working for other companies, among them Exxon
Mobil Corp.
The company came to Alaska in 2011 when it bought out Union Oil Company of
California and Chevron assets in Cook Inlet. At that time, Hilcorp’s website included
some company history, which described the company’s beginnings “as the proverbial
‘three guys and a telephone’ trying to make a living in the oil and gas business.”
By 2011, the company had grown to become one of the largest privately held explo-
ration and production companies in the U.S.
Lalicker, who has been with Hilcorp 12 years, is a University of Tulsa petroleum
engineering graduate who also holds degrees in law and business. He worked at
Australia’s BHP Billiton and at McKinsey & Co. before joining Hilcorp in 2006 as
executive vice president responsible for exploration and production.
Lalicker has most recently been president of Hilcorp and has been the face of the
company in Alaska, coming north to speak to local business groups and at conferences.
—KRISTEN NELSON
GREG LALICKER
see EIA OUTLOOK page 7
JUD
Y P
ATR
ICK
By ALAN BAILEYPetroleum News
The federal and state governments are
engaged in a project to reorganize and
simplify the arrangements for maintaining
government oil spill contingency plans for
Alaska, officials told the Alaska Forum on
the Environment on Feb. 15.
The agencies are “trying to streamline
the framework of government spill
response plans in Alaska and bring them
into closer consistency with national and
agency-level laws and regulations,” Nick
Knowles, the Environmental Protection
Agency’s Alaska area planner, told confer-
ence attendees.
Although any entity handling oil must
maintain an oil spill contingency plan,
backed up by the availability of appropriate
spill response resources, the state and fed-
eral governments also maintain plans. The
government plans help ensure that there are
adequate arrangements in place for dealing
with an oil spill, that adequate response
resources are available and that there are
specific tactics for dealing with spilled oil,
taking into account the concerns of com-
munities that may be impacted.
The government plans provide a frame-
work within which individual entity con-
tingency plans can be designed, ensuring
that the various plans meet government and
community requirements.
Goes back to Exxon ValdezThe current government planning sys-
tem dates back to the period following the
Exxon Valdez oil spill, when over a period
of a few years the federal government and
the state of Alaska engaged in parallel
efforts to create spill response plans. As a
consequence of working independently,
with Alaska moving ahead first, the two
government organizations came up with
two different plan frameworks. But the fed-
eral framework drove response planning
arrangements in states other than Alaska.
The federal system is driven top-down,
from a national contingency plan through
regional and area contingency plans within
the states.
Those differences between Alaska’s
plans and plans elsewhere persist. For
example, although the state, in common
with the federal government, uses a set of
procedures and standards under what is
called the incident command system for oil
spill response, the state plan documents do
not conform to the ICS standard as
employed in the national plan, Knowles
commented.
Moreover, Alaska now has a unified
plan for the whole state and a set of 10 sub-
area plans, under the unified plan, for dif-
ferent parts of the state. The unified plan
contains statewide policies and response
procedures, while each subarea plan con-
tains information specific to a subarea.
There is a regional response team that over-
sees maintenance of the unified plan and
subarea plans, while each subarea plan has
an area committee that is pulled together
periodically for plan updates. The concept
is that communities provide input to the
plans through the subarea committees.
It is, however, difficult to keep all the
Alaska plans updated when, for example,
the federal government issues new plan-
ning directives, especially given the num-
ber of subarea plans and the fact that an ad-
hoc committee must be formed to update
each plan. Policy changes can arise, for
example, as a result of incidents such as a
terrorist attack or a major spill such as the
Deepwater Horizon disaster, Knowles said.
Restructuring the Alaska systemThe envisaged reforms to the system
involve reconstituting the state’s unified
plan as an Alaska regional plan and, instead
of having 10 subarea plans, there would be
just four area plans. Four standing commit-
tees, rather than the previous 10 ad-hoc
committees, will maintain the area plans,
thus enabling plans to be updated annually,
rather than at the multiyear intervals that
result from the current arrangements. And
the rejigged plans would have a format
consistent with that of the national contin-
gency plan and those of other states, thus
simplifying the ability of out-of-state per-
sonnel to work with the Alaska documenta-
tion.
The four planning areas in Alaska
would consist of three offshore areas and
the entire Alaska landmass, more than
1,000 yards inland from the shore. The
three offshore areas, Southeast Alaska,
Prince William Sound, and western and
Arctic Alaska, would generally correspond
to the U.S. Coast Guard’s captain of the
port regions: The Coast Guard provides
federal oversight for offshore spill respons-
es, while the Environmental Protection
Agency is responsible for onshore federal
oversight. In the event of a spill, the appro-
priate federal agency would participate in a
unified command for the response, togeth-
er with the state, any appropriate local gov-
ernment entity and the party responsible for
the spill.
Underneath the area plans come more
specific plans, such as industry contin-
gency plans and plans for protecting specif-
ic geographic locations — the area plans
can help ensure consistency between these
various specific plans, Knowles explained.
The action planShannon Miller, interagency coordina-
tor from the Alaska Department of
Environmental Conservation, said that the
EPA, the Coast Guard and DEC have
worked together to build a plan of action
for transitioning to the new contingency
plan arrangements.
A key step will be the establishment of
the four committees for the Alaska plan-
ning areas, to maintain the new area plans.
The plan rework will involve recasting
information from the existing plans into the
new plan format. And each offshore area
plan will have an assigned on-scene com-
mander from the Coast Guard, she said.
Once the new plans are adopted, the old
plans will become redundant.
A statewide planning committee, which
has already met, is coordinating the plan-
ning effort, ensuring plan consistency.
DEC is resource constrained but wants
to see the new Alaska regional plan and
four area plans written and signed off by
the coming fall. The intent is to have the
committee for the western Alaska and
Arctic area meet in fall, and then have the
other committees meet by the fall of 2019,
Miller said.
Role of the committeesLt. Cmdr. Matt Hobbie, chief of plan-
ning and resource readiness for the U.S.
Coast Guard sector Anchorage, comment-
ed that the expectation is that the new area
committees will provide the flexibility to
deal with Alaska spill response issues. The
committees, in addition to appointed stand-
ing members from federal, state, local and
l G O V E R N M E N T
Simplifying the spill response planningThe state and federal governments are reorganizing regional contingency plans to simplify the plan organization and maintenance
4 PETROLEUM NEWS • WEEK OF FEBRUARY 25, 2018
Kay Cashman EXECUTIVE PUBLISHER & FOUNDER
Mary Mack CEO & GENERAL MANAGER
Kristen Nelson EDITOR-IN-CHIEF
Susan Crane ADVERTISING DIRECTOR
Heather Yates BOOKKEEPER
Marti Reeve SPECIAL PUBLICATIONS DIRECTOR
Steven Merritt PRODUCTION DIRECTOR
Alan Bailey SENIOR STAFF WRITER
Eric Lidji CONTRIBUTING WRITER
Gary Park CONTRIBUTING WRITER (CANADA)
Judy Patrick Photography CONTRACT PHOTOGRAPHER
Mapmakers Alaska CARTOGRAPHY
Forrest Crane CONTRACT PHOTOGRAPHER
Renee Garbutt CIRCULATION MANAGER
ADDRESS
P.O. Box 231647
Anchorage, AK 99523-1647
NEWS
907.522.9469
CIRCULATION
907.522.9469
ADVERTISING
Susan Crane • 907.770.5592
FAX FOR ALL DEPARTMENTS
907.522.9583
OWNER: Petroleum Newspapers of Alaska LLC (PNA)Petroleum News (ISSN 1544-3612) • Vol. 23, No. 8 • Week of February 25, 2018
Published weekly. Address: 5441 Old Seward, #3, Anchorage, AK 99518(Please mail ALL correspondence to:
P.O. Box 231647 Anchorage, AK 99523-1647)Subscription prices in U.S. — $118.00 1 year, $216.00 2 years
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POSTMASTER: Send address changes to Petroleum News, P.O. Box 231647 Anchorage, AK 99523-1647.
www.PetroleumNews.com
Petroleum News and its supple-ment, Petroleum Directory, are
owned by Petroleum Newspapers ofAlaska LLC. The newspaper is pub-
lished weekly. Several of the individ-uals listed above work for inde-
pendent companies that contractservices to Petroleum Newspapers
of Alaska LLC or are freelance writers.
WELDING SUPPLIESLincoln Miller MilwaukeeStoody Tweco ThermalMathey ESAB Norton
& Victor Gas Equipment
CYLINDER GASESIndustrial, Blueshield Productivity Mixes, Medical and Specialty
Cylinders for rent, lease, and purchase
BULK LIQUID GASESOxygen, Nitrogen, Argon, Carbon Dioxide, and Dry Ice
Toll Free 800 478.1520Anchorage - 6415 Arctic Blvd. • 907 562.2080Fairbanks - 2089 Van Horn Rd. • 907 452.4781Homer - 1104 Ocean Dr. #3 • 907 235.0693Kenai - Mi. 15.1 Spur Hwy. • 907 283.7141Wasilla - 301 Centaur Ave. • 907 376.6000
see SPILL RESPONSE page 7
PETROLEUM NEWS • WEEK OF FEBRUARY 25, 2018 5
Hats off to Ryan Lance, Joe Marushack for latest
Alaska investment
Afognak Leasing LLC
Air Liquide
Airswift
Alaska Energy Services, LLC
Alaska Dreams
Alaska Frac Consulting LLC
Alaska Frontier Constructors (AFC)
Alaska Gasline Development Corp. (AGDC)
Alaska Marine Lines
Alaska Materials
Alaska Railroad
Alaska Rubber & Rigging Supply
Alaska Steel Co.
Alaska Textiles
Alaska West Express
Alpha Seismic Compressors
American Marine
Arctic Catering & Support Services
Arctic Controls
Arctic Fox Environmental
Arctic Wire Rope & Supply
Armstrong
ASRC Energy Services
AT&T
Avalon Development
Aviator Hotel
BELL & Associates
Bombay Deluxe
BP
Brooks Range Supply
C & R Pipe and Steel, Inc.
Calista Corp.
Carlile Transportation
Certek Heating Solutions
Chosen Construction
CMS, Inc./Hepworth Agency
Colville Inc.
Computing Alternatives
CONAM Construction
Construction Machinery Industrial
Cruz Construction
Dowland-Bach Corp.
Doyon Anvil
Doyon Associated
Doyon Drilling
Doyon, Limited
exp Energy Services
Fairweather
Flowline Alaska
Fluor
Foss Maritime
Fugro
GMW Fire Protection
Golder
Greer Tank & Welding
Guess & Rudd, PC
ICE Services, Inc.
Inspirations
Judy Patrick Photography
Kuukpik Arctic Services
Last Frontier Air Ventures
Little Red Services, Inc. (LRS)
Lounsbury & Associates
Lynden Air Cargo
Lynden Air Freight
Lynden Inc.
Lynden International
Lynden Logistics
Lynden Transport
Mapmakers of Alaska
MAPPA Testlab
Maritime Helicopters
Motion & Flow Control Products
Nabors Alaska Drilling
Nalco Champion
NANA WorleyParsons
NEI Fluid Technology
Nordic Calista
North Slope Telecom
Northern Air Cargo
Northern Solutions LLC
Northrim Bank
NRC Alaska
Nutrien
Olgoonik Corp.
PENCO
Petro Star Lubricants
PRA (Petrotechnical Resources of Alaska)
Price Gregory International
Resource Development Council
SAExploration
Sourdough Express
Tanks-A-Lot
The Local Pages
Unique Machine
Usibelli
Volant Products
Waste Management
We salute ConocoPhillips’ chairman & CEO Ryan Lance, Alaska
president Joe Marushack and their team for their recent $400 million acquisition of long-time partner
Anadarko’s interest in their North Slope leases and Alpine pipeline.
This investment accentuates ConocoPhillips’ commitment to
exploration and development on the western North Slope, where the company has made several
recent oil discoveries in the Nanushuk and Torok formations,
the hottest exploration play in North America and the largest
geologic clinothem of its type in the world.
Joe Marushack, President of ConocoPhillips
Alaska
Ryan Lance, ConocoPhillips’ chairman
& CEO
6 PETROLEUM NEWS • WEEK OF FEBRUARY 25, 2018
By ALAN BAILEYPetroleum News
The world of oil spill response is an evolving phenom-
enon, with people continuing to think up ingenious
new ways of finding and dealing with renegade hydrocar-
bons. On Feb. 12 attendees at the Alaska Forum on the
Environment heard about three developments, each with
the potential to improve response effectiveness: increasing
the efficiency of in-situ oil burning; the use of forward
looking infrared, or FLIR, for the detection of oil; and the
use of dogs to sniff out the locations of remnant oil hidden
along a shore.
Burn efficiencyThe in-situ burning of spilled oil is a proven technique
which has been used widely. But, while the complete burn-
ing of oil should result in the production of, essentially,
water and carbon dioxide, in practice the burning in not
complete and thus generates huge volumes of air-polluting
soot, while also leaving an oily residue. Can the burning be
rendered more efficient?
Ali Rangwala, a professor in Department of Fire
Protection Engineering in the Worcester Polytechnic
Institute, described research into why the burning is ineffi-
cient and, hence, how the efficiency may be improved.
One interesting finding from the research is that all oil fires
tend to burn at the same constant rate with the same flame
height, regardless of the size of the burn. The researchers
determined that soot from the fire limits the burn to that
constant rate. In effect, the soot blocks the radiated heat
from the fire reaching the burning oil, thus limiting the oil
to an equilibrium temperature below the temperature
required for rapid and more complete burning.
Flame refluxerTo counter the blanketing effect of the soot, the
researchers have tried experimental oil burns with what
is called a flame refluxer, a system of vertical metal rods
protruding up through the fire: The metal conducts heat
that would otherwise be lost from the upper part of the
fire back down into the oil, hence increasing the temper-
ature of the fire, and thus increasing the burn rate and
efficiency. The researchers have tried this technique
burning oil that has leaked from electrical transformers,
North Slope crude oil, an oil slick and organic waste.
Adding 37 vertical metal rods to a test burn involving
North Slope crude mixed with water, for example,
increased the burn rate by a factor of more than two,
while adding 59 rods increased the rate about six times,
Rangwala said.
Offshore burnsThe challenge in the case of an offshore oil slick is the
cooling effect of the water on which the thin layer of oil
floats. To overcome this problem, the researchers tried
placing a fine copper mesh on the slick and attaching
copper coils rather than rods to the mesh to transfer heat
into the burn. A burn in a test tank showed a six-fold
improvement in the burn rate relative to a traditional
burn approach, Rangwala said. The efficiency also
improved: oily residue left after the burn dropped from
32 percent of the original oil to somewhere between 1.5
and 4 percent, with much less smoke and a reduction of
50 percent in the ratio of carbon monoxide to carbon
dioxide generated.
There are many potential applications for this tech-
nique, Rangwala suggested.
Infrared oil detectionLee Majors, planning and development manager for
Alaska Clean Seas, the North Slope oil spill response
organization, talked about the use of forward looking
infrared to detect spilled oil. Infrared detection involves
the use of a camera designed for the sensing and imaging
of infrared radiation, a form of radiated heat. The camera
produces digital images similar to those from a conven-
tional digital camera but using infrared radiation rather
than visible light.
The infrared detection of oil depends on the fact that
oil and water have different levels of heat emission,
Majors explained. The slightly higher radiation from oil
appears as light areas in an FLIR image. And the tech-
nology is sufficiently sensitive to even detect the level of
the oil in an oil tank.
The technology can be used on many different plat-
forms, including ships, aircraft and drones. There are
also handheld FLIR devices. And FLIR cameras can be
used in almost all spill response situations. Conditions to
be evaluated when considering the use of FLIR particu-
larly relate to visibility, with fog, rain or snow potentially
detracting from the technology’s effectiveness, Majors
said. With ice prevalent on the North Slope for around
eight months of the year, ice conditions also must be
considered when evaluating the potential for FLIR use
on the Slope, he said.
Uses in ice and snowAlthough it is not possible to use FLIR to detect oil
under ice, the technology is very effective at locating oil
slicks on water between ice floes. On the North Slope
FLIR can also detect warm, recently produced oil that
has been spilled under snow — in a spill response the
technology can prove invaluable in outlining the full
extent of a spill in snow, beyond the area where the oil is
immediately visible. And a FLIR image can be merged
into a map of the spill.
However, FLIR cannot detect oil under snow, once
the oil has cooled. The FLIR images also become unre-
liable in detecting a very thin, surface oil layer, Majors
l E N V I R O N M E N T & S A F E T Y
New ideas for dealing with oil spillsImproved efficiency of in-situ burning, the use of forward looking infrared and the use of sniffer dogs to locate oil can all help
see NEW IDEAS page 9
PETROLEUM NEWS • WEEK OF FEBRUARY 25, 2018 7
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EIA said, with the growing demand for
natural gas pushing production into
more expensive-to-produce areas in all
cases, “putting upward pressure on
production costs and prices.”
The agency said growth in the domes-
tic and export markets drives an increase
in U.S. natural gas prices at benchmark
Henry Hub in the reference case, with
crude oil prices affecting natural gas
changes in global natural gas consump-
tion, U.S. exports and associated gas —
natural gas produced from oil formations.
In the reference case domestic natural
gas production grows 6 percent per year
from 2017 to 2020, then slows to less
than 1 percent per year through 2050.
The 2018 annual outlook reference
case has Henry Hub prices 14 percent
lower on average through 2050 than the
2017 outlook, EIA said, citing an estimat-
ed increase in lower-cost resources, pri-
marily in the Permian and Appalachian
basins, supporting higher production lev-
els at lower prices over the projection
period. Increased natural gas production
comes from both shale gas and tight oil
plays, which account for more than three-
quarters of natural gas production in the
U.S. by 2050.
Crude oilU.S. crude oil production in the refer-
ence case is projected to surpass the 1970
record of 9.6 million barrels per day this
year, and EIA said that production vol-
ume “will continue to grow as upstream
producers increase output because of the
combined effects of rising prices and pro-
duction cost reductions.”
Lower 48 onshore tight oil continues
to be the main driver of U.S. crude oil
output, accounting for some 65 percent
of cumulative domestic production in the
reference case through 2050.
EIA said that despite higher oil prices,
in the reference case “U.S. crude oil pro-
duction levels off between 11 million and
12 million barrels per day as tight oil
development moves into less productive
areas and as well productivity declines.”
North Sea Brent oil prices in 2016, in
real terms, “were at their lowest level
since 2004,” EIA said, and increased
modestly in 2017, a trend which EIA said
is expected to continue through 2050 in
the reference case, reaching $114 per bar-
rel in 2017 dollars in 2050 — compared
to $229 in the high oil price case and $52
in the low oil price case.
Outlook changesEIA said U.S. Geological Survey
assessments of the Wolfcamp and
Sprayberry formations were incorporated
into the current update, mainly affecting
regional oil and natural gas production
and related markets.
On the technology side, EIA said oil
and natural gas technology and operation
improvements were revised “by increas-
ing rates of technological progress during
the early development of currently unde-
veloped resources to reflect industry-
wide identification of the most produc-
tive areas and to select the best technolo-
gies for particular geologies.” l
continued from page 3
EIA OUTLOOK
tribal governments, will have members at
large representing entities such as the oil
industry, regional citizens’ advisory coun-
cils, oil spill response organizations and
non-government organizations. The stand-
ing committees will meet at least twice per
year, to consider plan updates based on
new knowledge, and will be expected to
produce annual reports and updates,
Hobbie said.
Given the very large geographic scale of
some of the new planning areas, the group
working on the Alaska contingency plan
reorganization did consider the possibility
of establishing more than one standing
committee for some areas. However, the
group determined that this would be
impractical, given the limited resources
available to conduct the substantial work
and reporting that each standing committee
has to carry out, Hobbie said.
However, although there will only be
one plan and one standing committee for
each planning area, a standing committee
could set up subcommittees or an ad-hoc
committee to address specific issues in an
area, he said.
Flexibility to adaptUltimately, the standing committees,
with their focus on improving the area con-
tingency plans, will become the most
important component of the system, Hobbie
said. The expectation is that the new com-
mittee structure will be able to more rapidly
and effectively accommodate the changing
needs for response capabilities in Alaska
than is possible under the current arrange-
ments. But the effectiveness of the commit-
tees will depend on help, especially help
from the communities that the contingency
plans are designed to protect, he said.
And the speakers emphasized their
desire to conduct outreach, to communi-
cate with communities about the planning
work. l
continued from page 4
SPILL RESPONSE
FACILITIESKuparuk infrastructure upgrades approved
Alaska’s Division of Oil and Gas has approved applications by ConocoPhillips
for a couple of upgrades to the surface infrastructure in the Kuparuk River field.
The first of the upgrades involves the relocation of a methanol storage tank and
a pump module from drill sites DS-3J and DS-1H to DS-1D. The modules will be
used for continuous methanol injection in the field. Installation of the modules on
DS-1D will involve the placement of eight 18-inch diameter vertical support
members, to support the modules on the pad.
The second upgrade involves the installation of a new 8-inch diameter seawa-
ter pipeline, connecting the pigging module on drill site 1B to an existing 12-inch
water pipeline. Laying of the 1,400-foot pipeline will involve constructing two
underground road crossings near the northeastern end of the Kuparuk Base Camp
and Central Production Facility No. 1.
—ALAN BAILEY
sales of B.C. wine in Alberta and warning
of more reprisals unless Trudeau upholds
Canada’s constitution which gives him
final authority over the movement of any
resources through pipelines that cross
provincial borders.
Study counters dilbit viewWhile the saber-rattling continues, new
research compiled by Natural Resources
Canada scientists counters the widely held
view that an escape of dilbit would be dis-
astrous to open water.
NRC scientist Heather Dettman said
tests conducted since 2014, using various
grades of dilbit, show that the substance
can float for up to three weeks, even under
wave conditions that would cause conven-
tional crude to mix with the water.
“The misinformation is that (dilbit)
would sink as soon as it hits the water,” she
said. “That’s the messaging that’s been out
there and that’s not what we’ve been find-
ing, even in fresh water.”
But she did concede that if a storm
pushed the dilbit ashore that would pose a
serious cleanup problem.
Dettman said the team of NRC scien-
tists is now trying to determine how long a
spill would pose a threat to the environ-
ment as well as figuring out how much
harm would be caused by the toxic solvents
used in dilbit.
However, she suggested light crude
might actually be more hazardous when it
hits water.
“That’s like adding cream to coffee,”
she said. “It’s all mixed in and it gets stuck
in the sediment.”
Dettman said dilbit “looks ugly and is
not good for fish. But because it’s there you
can pick it up (and) we get a very high
recovery rate.”
Kinder MorganKinder Morgan has made its own moves
to gain public support by promising that
when Trans Mountain reaches its design
capacity of 890,000 barrels per day (three
times current volumes), it will provide
large, powerful escort tugs through the
Juan de Fuca Strait between the B.C. main-
land and Vancouver Island to help either
avert or clean up spills.
The company said it will send more
than C$100 million in extra funding to the
Western Canada Marine Response Corp., a
federal government agency responsible for
mitigating oil spills, as it moves toward a
seven-fold increase in the number of
tankers leaving its Westridge terminal in
the Port of Vancouver to 34 shipments a
month.
For now, Kinder Morgan is also stand-
ing behind its record of never having a sin-
gle spill in the 62 years that tankers have
sailed from Westridge.
NEB, TrudeauIn the midst of the political furor
Canada’s National Energy Board has infu-
riated pipeline opponents by giving Kinder
Morgan the greenlight to start work on
Westridge expansion, while ending restric-
tions on the related construction work
around the terminal site.
The federal regulator also indicated it
will override any attempts by municipal
governments to stall progress on the
pipeline expansion.
Trudeau has stepped up his public role
in the debate by telling the National
Observer that in blocking the pipeline
Horgan is “putting at risk (Canada’s) entire
climate change plan. If the Kinder Morgan
pipeline does not go through, Alberta will
withdraw its support for the plan. We will
not have Alberta fighting to achieve its car-
bon targets.”
IndustryThe Canadian petroleum industry wants
to see the pipeline proceed, although there
is no commonly held view on what can be
done without damaging Alberta’s econo-
my.
“At the end of the day, it’s frustrating
because British Columbia would not last a
week without oil and gas,” said Mark
Salkeld, chief executive officer of the
Petroleum Services Association of Canada.
“They support the LNG industry, so
they are all for fossil fuels in their own
backyard. But they are ready to mess
around with Alberta and hold us back from
developing our natural resources because
they have access (to tanker ports on the
Pacific Coast) and we don’t,” he said.
While the bare-knuckles fight contin-
ues, Kevin Neveu, chief executive officer
of Precision Drilling, Canada’s largest
drilling contractor, said the slowdown in
building pipelines makes Alberta’s oil sec-
tor “less economic and less competitive.”
Energy consulting firm IHS Energy said
the widening gap between West Canada
Select heavy crude and benchmark U.S.
prices has widened, costing Canada more
than C$1 billion in the last two months
alone, affecting revenues to producers and
taxes and royalties to governments.
Gary Leach, president of the Explorers
and Producers Association of Canada, said
that while Alberta and B.C. trade blows,
ignoring their reliance on resource-based
economies, they are demonstrating to out-
side investors “the worst example of a dys-
functional federation.”
An editorial in the Calgary Herald said
Horgan has “exhibited a flair for the worst
kind of politics (by obstructing Trans
Mountain). He’s apparently quite comfort-
able with his province facilitating the
export (through a Vancouver shipping ter-
minal) of dirty coal from the United States
to generate electricity in Asia.”
“Horgan is seemingly quite content to
receive Alberta oil that keeps the bulk of
B.C. vehicles moving. But he flinches at
the prospect that Canada could end its
dependence on the United States and send
its oil to markets that would pay a higher
price — creating needed employment and
billions of dollars in revenue for govern-
ments at all levels.” l
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LAND & LEASINGNorth Slope, Cook Inlet leases surrendered
Armstrong Energy, ConocoPhillips Alaska and Hilcorp Alaska each surrendered
oil and gas leases to the state in late December and January.
The Alaska Division of Oil and Gas leasing report shows that Armstrong Energy
surrendered three adjacent leases in state waters offshore the National Petroleum
Reserve-Alaska on the west side of the North Slope, all part of a block held by the
company. A division map shows two of the three leases are the most southerly of a
block immediately offshore NPR-A; the third lease, the most easterly, is separated
from the shore by another lease held by Armstrong Energy.
ConocoPhillips surrendered a block of 13 North Slope leases immediately south
of the Prudhoe Bay unit. The Dalton Highway runs through the western portion of
this block.
Hilcorp surrendered three onshore Cook Inlet leases, all on the Kenai Peninsula,
one south of Clam Gulch and east of the Ninilchik unit; one northeast of Ninilchik
adjacent to the eastern edge of the Ninilchik unit; and one an isolated company lease
in the middle of the peninsula northeast of Nikolaevsk.
Three Cook Inlet area held by Woodstone Resources leases were terminated for
failure to pay rent. One is an isolated lease on the west side, west of Moquawkie and
northeast of Nicolai Creek. Two are adjacent leases east of Nikolaevsk and north of
Kachemak Bay on the southern Kenai Peninsula.
The division denied applications by Alliance Exploration to assign interests to
Linger Energy Holdings. Data filed with the Alaska Department of Commerce,
Community and Economic Development’s Division of Corporations, Business and
Professional Licensing show both entities are limited liability companies 100 per-
cent owned by The Linger Trust.
—KRISTEN NELSON
continued from page 1
PIPE CASE
said. However, a FLIR image can be used to assess the
thickness of an oil pool.
FLIR technology can also be used to detect marine
mammals, because of the heat that the animals radiate. In
fact, on the North Slope people use FLIR to detect polar
bear dens. Majors showed an image of a den, with a sow
and two cubs clearly visible.
Using trained dogsScott Pegau from the Prince William Sound Oil Spill
Recovery Institute talked about an evaluation of the use of
dogs to detect hidden, spilled oil on Prince William Sound
beaches. This is relic oil from the Exxon Valdez oil spill
that has been on the beaches for 25 years but that has not
been degraded because it is not in direct contact with the
sea or the atmosphere.
The idea is to retrain dogs that were originally intended
for detecting unexploded bombs, to find oil instead. Pegau
said that the dogs can be trained to recognize some specif-
ic threshold of oil concentration. The Prince William
Sound evaluation involved determining if a suitably
trained dog could find remnant oil by taking the dog to
two different residual oil sites. Could the dog both locate
oil and delineate the extent of an oil patch? If so, it could
be possible to map out areas of contamination without
having to dig ditches all across a beach.
The dog used for the Prince William Sound experiment
was part of a team of six dogs being used to detect oil in
streams as part of an oil spill cleanup in Saskatchewan,
Pegau said.
A team effortThe oil search test involved a specialist dog handler, a
dog trainer and a shoreline oil cleanup expert. The dog
was fitted with a GPS collar, to enable the team to track
the dog’s position. When the dog detected a target, it sig-
naled an alert. The team placed a flag to mark each alert.
It was found that for the most part the searches resulted in
oil patch delineation, with the dog handler having to
repeatedly move the dog out of an oil patch area, so that
the dog could locate another edge of the patch, Pegau
said.
In some cases the team buried an oil target, to see if the
dog would find it.
Oil detectionIn the experiment, the dog made 52 alerts for oil, 19 of
which were found to be associated with oil beneath the
surface and nine of which were not associated with the
presence of oil. It did not prove possible to verify whether
22 alerts were associated with oil. And two alerts were
found to be a result of site contamination because people
had just come from an oil impacted beach.
A reason for some false alerts may have been oil odors
migrating up the shore before reaching the surface, or
because of a very low oil concentration, Pegau said.
The result of the experiment was a determination that
the dog could detect known locations of oil in the context
of Prince William Sound, in areas where the oil is not
always visible. The most valuable use of dogs could be
determining which beaches are clear of oil, without hav-
ing to dig pits in the beaches, Pegau suggested. l
PETROLEUM NEWS • WEEK OF FEBRUARY 25, 2018 9
Oil Patch Bits
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continued from page 6
NEW IDEASwell blowout occurred, a small amount of oil
could possibly reach Cook Inlet via the Anchor
River in the summer, but based on modeling, no
oil would reach Cook Inlet in the winter.
Public comment on the application is being
accepted through March 13.
—KRISTEN NELSON
continued from page 1
SEAVIEW PAD
monies from leasing and royalty in the 1002 area
and she said if there is additional interest there will
be more revenues to the state.
DNR Commissioner Andy Mack told the com-
mittee that the Congressional Budget Office esti-
mated the two proposed lease sales in the 1002
area could generate $2.2 billion, and said the state
believes most of that money would come in the
first of the two proposed sales.
He said the state has learned through the tax
credit program how valuable seismic information
is, and with the potential of a significant amount of
revenue the state wants to do what it can to draw
as many qualified bidders as possible and increase
the value of the sale to the state.
—KRISTEN NELSON
continued from page 1
ANWR SEISMIC
based only on a re-evaluation of the
resource potential of the Nanushuk and
Torok — rock units associated with
major recent oil discoveries in the region
— USGS increased potential undiscov-
ered NPR-A oil reserves from a few hun-
dred thousand barrels in 2010 to 1.7-21.8
billion barrels, with a mean estimate of
8.8 billion barrels.
And all this is on top of already-dis-
covered Nanushuk oil on the western
North Slope, on both sides of the
Colville River, including Armstrong’s
big discovery at Pikka (1.2 billion bar-
rels, with a 120,000 barrel-a-day devel-
opment on track to produce in 2022) that
is east of the Colville and
ConocoPhillips’ Willow find in NPR-A
(300 million barrels of recoverable oil,
100,000 bpd possible from first develop-
ment in 2023) that ConocoPhillips exec-
utive Matt Fox said in November had
enabled the calibration of seismic tech-
niques to specifically search for similar
prospects.
The company identified “a lot” of
Willow lookalikes in the Nanushuk, per
Fox — “every one of them we’ve drilled
so far has had oil in it, so we’re hopeful
that several of these Willow lookalikes
will deliver.”
The thick sands that form the initially
discovered reservoir at Pikka can be
traced along a zone more than 40 miles
in length, with potentially more than 10
billion barrels of oil in place. Moreover,
the same geology extends for more than
a hundred miles across NPR-A, with 46
prospects identified on just one seismic
line, an Oil Search executive said recent-
ly.
In February 2016, before Armstrong’s
Horseshoe wildcat results were in, then-
Alaska Department of Natural Resources
Commissioner Mark Myers said “the
proven contingent oil reserve number
makes the (Pikka) discovery the largest
since the Alpine field, the probable con-
tingent reserve number the largest since
the Kuparuk field, and the possible con-
tingent number makes the discovery the
largest since Prudhoe.”
The NAPE Summit on Feb. 5-9 had
12,299 attendees, which was up about
1,000 from 2017. An annual event
designed to be the oil and gas industry’s
worldwide marketplace for the buying,
selling and trading of prospects and pro-
ducing properties, NAPE celebrated its
25th anniversary this year.
So, who expressed interest in the
western North Slope, home of the most
important trend in North Slope and U.S.
exploration activities over the past three
years?
Nanushuk area prospectsLong-time Alaska oil and gas investor
Paul Craig, who has an interest in the
three-lease South Nanushuk prospect
south of Horseshoe, plus a royalty over-
ride in the northern part of the undevel-
oped Umiat oil field, told Petroleum
News, “I left NAPE feeling very positive
about Alaska and about the future of
Umiat and the South Nanushuk prospect
given the level of interest shown at
NAPE” in the Nanushuk and Torok for-
mations.
“Some people are preoccupied with
ANWR opening … but we (the western
North Slope) have the biggest clinothem
in the world … with about 1 billion bar-
rels of oil in place at Umiat.”
In Craig’s opinion, “The Lower 48
has shifted from exploration to mining
projects in tight oil when they can get
production costs low enough. It doesn’t
have exploratory risk, but Bill Armstrong
and his partners are still out there doing
real exploration. That takes guts and
vision. Armstrong was preceded on the
North Slope by ARCO’s Robert O.
Anderson at the Prudhoe Bay discovery.
That’s what made America great in the
first place — people who took intelligent
risks.”
In the booth Craig was part of at
NAPE, three entities represented Cook
Inlet and North Slope opportunities —
Aurora Exploration, Craig’s company
Trading Bay Oil & Gas and Malamute
Energy.
Aurora Exploration is operator of the
Cook Inlet basin Nicolai Creek unit with
half of Aurora owned by Trading Bay,
and the other half by Aurora Power
Resources in which Scott Pfoff is the
principal owner.
The South Nanushuk prospect, owned
by Zamarello Trust, Trading Bay and
Paul Gardner, consists of 55-plus square
miles.
Malamute operates the undeveloped
Umiat oil field and was represented at
the summit by Leonard Sojka and Corri
Feigi, former director of Alaska’s
Division of Oil & Gas.
Pfoff’s impression of NAPE was a
“medium turnout” compared to previous
years. “I’ve seen it worse and I’ve seen
it a lot better,” he told PN.
There was nonetheless an uptick in
interest in Alaska over last year, he said;
both from people looking to invest and
companies interested in buying and oper-
ating prospects.
“We had some really good prospects
represented at our booth,” Pfoff said.
“They loved the geology.”
Guitar safest investment?Possibly one of the most risk-free
North Slope investments would be the
former Hemi Springs unit, adjacent the
southwest side of the Prudhoe Bay unit.
The Hemi Springs unit, which termi-
nated in 1992 under different ownership,
was renamed and unitized as the Guitar
unit by its current owner and operator
Alliance Exploration.
Both Barry Foote and his son Derek,
who heads up Alliance in Alaska and is
based in Sterling, said their preference
was to find a partner to come in and drill
a planned exploration well with them.
When asked whether Alliance has any
meetings with potential investors or buy-
ers scheduled, Derek told PN, “We tenta-
tively scheduled meetings for next
month (March). We’ll consider almost
anything … when you’re playing in
Alaska where the big boys play you have
to keep all avenues open.”
Derek said the Guitar unit “is the eas-
iest North Slope play to get developed
because it’s easily accessible and has an
existing well on one lease.”
The operator “should be able to cut
the time way down” that it takes to first
oil, he said, noting it would only require
6-7 miles of ice road to drill the well
Alliance has scheduled for next winter.
“The staging area that BP has is right
there; there’s an existing pad.”
The Guitar exploration plan said the
well will penetrate to the base of the
Ivishak and a lateral well will be drilled
into the Kuparuk C.
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INSIDER
see INSIDER page 12
PETROLEUM NEWS • WEEK OF FEBRUARY 25, 2018 11
lution of the worldwide energy system
may continue into the future. In introduc-
ing this year’s findings, Spencer Dale, BP
Group chief economist, said that the time
period that the Outlook encompasses has
been extended by five years to 2040, to
bring some features of the energy transi-
tion into sharper focus. Also, on the basis
that no suggested future energy scenario
will prove to be correct, the Outlook puts
forward six or seven different scenarios,
without suggesting a base or central sce-
nario that is thought most likely.
The value of forecasting is to better
understand the nature of the uncertainties
that people face, and the key judgments
and issues that will determine the future,
Dale said.
The Energy Outlook identifies three
key themes that will shape the energy tran-
sition over the next 20 to 30 years: the
growth in energy demand in the develop-
ing world; the increasing competitiveness
of energy markets; and the continuing
challenge of bringing down carbon emis-
sions to meet goals set in Paris in 2015.
Competition in energy markets will inten-
sify because demand will slow as a result
of improved energy efficiency while tech-
nical innovation will make more energy
available, the Outlook suggests.
And the Outlook looks at the energy
transition through three lenses: how energy
is used, where it is used and what form the
energy takes.
World GDP doublesUnder all scenarios the Outlook
assumes that the world gross domestic
product will more than double by 2040,
driven in part by population growth but
mainly by fast-growing emerging
economies. However, given anticipated
gains in energy efficiency, energy demand
would only increase by about one third.
Oil and other liquid fuels appear set to
play a continuing major role over the next
20 to 30 years, although demand growth
will likely slow and at some point, level
out. In particular, industrial non-fuel use of
oil will remain buoyant, given the rising
standards of living in various parts of the
world. Global coal consumption will likely
flatten.
Scenarios in which governments are
more aggressive in their climate policies
could push that leveling of oil demand
towards earlier years. However, in general,
future oil demand would tend to plateau
rather than peak and then drop. Oil and gas
remain important, regardless of which
energy scenario is considered.
Under a scenario referred to as the
“evolving transition,” a transition that con-
tinues along the current path, with the
energy system evolving in response to cur-
rent government policies, new technolo-
gies and social preferences, energy
demand increases by about one third by
2040. Industrial energy demand would
account for about half of the increase in
energy consumption, while growth in
demand from the transportation sector
would slow sharply as transportation effi-
ciency improves. The power generation
sector would account for almost 70 percent
of the increased need for primary energy,
in particular because of the need for home
appliances such as air conditioning in an
increasingly affluent world.
Electric carsThe Outlook devotes significant atten-
tion to questions around the increasing use
of electric cars, and the impact on oil
demand of the replacement of the internal
combustion engine by electrical power in
road vehicles. The Outlook links this phe-
nomenon with what it calls the mobility
revolution, in which the use of electric cars
— and in particular electrically powered
autonomous vehicles — could lead in the
2030s to a large growth in shared mobility,
where people increasingly ride in non-
owned cars. That phenomenon, coupled
with the need to consider hybrid electric
cars as well as pure electric cars, has led
the BP analysts to evaluate future electric
vehicle energy demand, not in terms of the
number of electric cars on the roads, but in
terms of the total number of road miles
powered by electricity. The use of
autonomous cars in conjunction with
shared mobility would increase the amount
and intensity of electric propulsion, as the
cost of car transportation drops.
However, the efficiency gains that a car
manufacturer could book as a result of sell-
ing more electric vehicles could partly off-
set the manufacturer’s need to improve the
efficiency of other types of vehicle, to
meet overall efficiency standards. Thus,
the reduction in oil demand from selling
more electric vehicles would tend to be
largely offset by less need to make internal
combustion engine cars more efficient.
But one scenario considers the possibil-
ity of a worldwide ban on any car with an
internal combustion engine from 2040
onwards, although with some internal
combustion engine vehicles still in use
while being phased out. This scenario,
while unlikely, provides some insights into
the manner in which electric car use may
impact oil demand. Dale commented that
the scenario seems improbable because it
exceeds even the most stringent govern-
ment policies announced to date, because
of the cost to people of switching to elec-
tric vehicles and because of the difficulties
of implementing the necessary electric car
charging infrastructure worldwide.
Under this scenario global oil demand
would drop by about 10 million barrels per
day. That represents about 10 percent of
current oil production. Projecting that for-
ward to anticipated energy demand in 2040
indicates that oil usage would likely be
slightly higher than today, thus suggesting
that electric car use will not prove a game
changer for oil demand.
Energy suppliesOn the supply side, the BP report sees
U.S. tight oil providing much of the supply
growth in oil in the earlier years of the
forecast. Then, as the growth in tight oil
starts to plateau, there will be a heightened
role for oil supplies from the members of
the Organization of the Petroleum
Exporting Countries. However, a key
uncertainty is the potential for tight oil pro-
duction to keep growing.
The Energy Outlook suggests that natu-
ral gas usage will grow much more strong-
ly than that of oil or coal. This growth will
take place in particular in the power and
industrial sectors. There will likely be an
increase in gas demand by developing
countries, with low cost gas becoming
increasingly available around the world as
liquefied natural gas supplies increase.
Moreover, government policies, particular-
ly in China, are encouraging moves away
from the use of coal towards cleaner, low
carbon fuels including natural gas.
However, even if stringent climate policies
were to dampen gas demand, that demand
is unlikely to drop below current levels.
The use of renewable energy, in partic-
ular wind and solar, is growing the fastest
of any energy sector, accounting for about
40 percent of the growth in primary energy
sources. Renewables are gaining share
within the energy mix more quickly than
has any other fuel seen in history.
Falling costs and, with that, increasing
competitiveness, are driving the growth in
renewable energy. In addition to continu-
ing improvements in technology, there is
strong government support for renewable
use. And as the use of renewables grows,
production improves and costs fall, leading
to faster growth. The result, by 2040, will
likely be the most diversified fuel mix that
the world has ever seen, with oil, gas, coal
and non-fossil fuels each accounting for
about 25 percent of the total energy supply.
And with maintained or increased future
government support for renewables, the
penetration of renewables could go much
higher.
Carbon emissionsThe anticipated future of carbon emis-
sions varies considerably between differ-
ent energy transition scenarios. Under the
evolving transition scenario, with energy
evolution continuing along its current path,
carbon emissions will continue to rise,
albeit much more slowly than in the past.
To bring carbon emissions to the levels
required by the Paris agreement, there will
need to be a much more decisive break
from past energy habits, with the power
generation sector being particularly critical
to driving change — even a future com-
plete ban on internal combustion engine
cars would do little to move the carbon
dioxide pendulum, Dale commented.
BP Group CEO Bob Dudley, when
introducing the Energy Outlook, com-
mented that a “race to renewables” will not
meet the Paris goals. The focus, instead,
needs to be on lower emissions. What is
needed is a comprehensive approach
involving both efficiency in energy use
and a continuing lower carbon fuel mix, he
said.
Dale commented that, in his view, the
key to reducing carbon emissions is carbon
pricing. Placing a price on carbon emis-
sions provides an incentive for everyone,
both energy producers and energy con-
sumers, to play a role in the carbon emis-
sions aspects of the energy transition, he
said. l
continued from page 1
BP OUTLOOK
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907. 258.4704
application was filed, such as supplemen-
tal filings and responses to previous data
requests and requests based on recent
stakeholder comments.
“AGDC has already provided FERC
with the information the corporation
believes is necessary for the agency to
complete the draft EIS,” Jesse Carlstrom,
AGDC’s communications manager, told
Petroleum News in a Feb. 16 email.
“However,” he said, “AGDC is commit-
ted to working collaboratively with
FERC to address the agency’s concerns
and will provide a schedule for submit-
ting responses to their additional ques-
tions no later than March 7, 2018.”
As to how the additional FERC
requests will impact the schedule for per-
mitting the project, Carlstrom said:
“AGDC remains committed that FERC
will have the information the agency
needs to prepare the draft Environmental
Impact Statement in 2018. AGDC plans
to continue advancing the Alaska LNG
project and will respond to FERC’s
request for clarification.”
ClarificationWhat is FERC requesting?
“FERC is now requesting clarification
on previous responses and requesting
more detailed information normally pro-
continued from page 1
FERC QUESTIONS
see FERC QUESTIONS page 12
vided during the State of Alaska permit-
ting process,” Carlstrom said.
He said that “in earlier responses to
FERC, AGDC indicated it is unneces-
sary to provide these studies at this point
in the application because this detailed
information is normally provided during
the State of Alaska permitting process.”
FERC said AGDC had previously
stated “that because these studies are not
required by the state or other entities,
AGDC will not provide the informa-
tion,” but, the letter continues, “FERC’s
regulations implementing the National
Environmental Policy Act require appli-
cations filed under the Natural Gas Act
to include the information identified in”
federal regulations and “applicants must
conduct any studies or provide any
information that the Commission staff
considers necessary or relevant to deter-
mine the impact of the proposal on the
human environment and natural
resources.”
The letter went on to say that “any
response from AGDC that states, ‘the
information is not required by the state
or other agency and will not be provid-
ed’ will be considered incomplete and
reissued,” with incomplete responses
and reissuance of requests for informa-
tion affecting the schedule for complet-
ing environmental review for the proj-
ect.
FERC said it also “anticipates addi-
tional data requests on the safety, relia-
bility, and engineering design, including
questions regarding compliance” with
federal regulations of the U.S.
Department of Transportation and the
U.S. Coast Guard.
AlternativesThe Matanuska-Susitna Borough told
FERC in early January that AGDC had
not studied Port Mackenzie as an alter-
native, but instead studied another site.
FERC is now asking for “an environ-
mental and engineering analysis of the
site” identified by the borough, and the
pipeline route to that site, including
specified information so that FERC “can
conduct a quantitative comparison
between AGDC’s proposed and alterna-
tive liquefaction sites,” including size in
acres; availability for purchase or long-
term lease; requirement for any addition-
al stabilization; any additional utility or
road infrastructure that would be
required; effects on waterway conges-
tion and safety; effects on commercial
and recreational use of waters; dredge
volumes necessary; marine mammal or
other species associated with the site;
effects on residential occupation or use
of areas; mainline pipeline length; num-
ber of waterbodies crossed by modified
mainline; National Wetland Inventory
mapped wetlands crossed by modified
mainline; compression requirement in
horsepower; and waters of the United
States within the site.
AGDC is also asking for “documen-
tation of recent consultation with the
Matanuska-Susitna Borough to support
the analysis.”
FERC also wants AGDC to revisit
Valdez as a site for the liquefaction facil-
ity, noting that the 1988 final EIA for the
Trans-Alaska Gas System found the
pipeline route to Valdez preferable to the
route to Cook Inlet.
FERC said AGDC indicated that
because the Delta and Gulkana rivers
were designated as Wild and Scenic
Rivers in 1980, that the Valdez route was
precluded.
FERC disagreed, saying the TAGS
final EIS evaluated the Wild and Scenic
Rivers issue and concluded the route
would not cross the portion of those
rivers designated as wild and scenic and
directed AGDC to provide a routing
analysis avoiding the designated por-
tions of the Delta and Gulkana rivers. As
with Port Mackenzie, FERC provided a
list of information required for a quanti-
tative comparison: length of pipeline;
length adjacent to existing rights of way;
gravel requirements; forestland crossed;
discontinuous permafrost; wetlands
crossed; waterbodies crossed; and water-
body crossings more than 100 feet in
length.
FERC is also requiring more informa-
tion on the Denali National Park and
Preserve preferred alternative alignment.
The agency said AGDC told it additional
field survey costs were not warranted.
The agency did not address the cost
factor directly but said: “FERC uses
three criteria when evaluating an alterna-
tive: whether or not it meets the project
objective, whether it is technically and
economically feasible, and whether it
offers a significant environment advan-
tage over the proposed route.”
FERC also inquired if a route alterna-
tive identified by the Knik Tribe in 2015
was still applicable and practicable,
directed AGDC to coordinate with the
tribe to see if their concerns had been
addressed and if not, “provide an engi-
neering and environmental analysis of
the alternative route identified by the
Knik Tribe to address their concerns.” l
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The unit currently has three leases
but will soon have four as the company
has signed an agreement with
ConocoPhillips and its partners, owner
of the fourth lease, and are awaiting
lease transfer by the state. The Hemi
Springs State No. 1 well, drilled by
ARCO in 1984 in that fourth lease, was
certified as capable of producing hydro-
carbons in payable quantities from the
Kuparuk C. And, although Alliance’s
well will target the Kuparuk C and
Ivishak, oil shows have been demon-
strated in the West Sak and Ugnu across
the region, Division of Oil and Gas
documents say.
In other division filings Alliance said
the ARCO well was not drilled in the
“most optimum location for Kuparuk C
pay production.” That well also pene-
trated the Ivishak and found a thick pay
section. (Ivishak is the main Prudhoe
formation.)
Depending on the results from their
first exploration well, Alliance may
drill a second well the following year
targeting a structural high in the
Ivishak, bounded by a fault.
NAPE was “pretty encouraging for
our play. … (We think we have) “a
good chance of getting a partner,”
Derek said.
“People have more interest in Alaska
right now because … there’s a lot of oil
left behind up here, whereas in the
Lower 48 there are a lot of frack plays
but not the major plays you can get on
the North Slope.”
Jim White, Alaska legendAlthough geologist Robert Blodgett
who strongly endorses the promising
Donkel-Cade Stinson project near
ANWR on the Eastern North Slope is
probably a close second in terms of
being interesting and knowledgeable,
wildcatter Jim White of Alaskan Crude
takes the prize.
White, who drilled his first wildcat in
Alaska in 1977, attended the NAPE
summit and actively promoted Alaska’s
missed opportunities in both the Cook
Inlet basin and the North Slope.
White would like to see a lot of
Alaskans get rich from oil operations: “I
think it’s time Alaska had a cottage oil
industry and its runs by Alaskans. My
pet peeve — the U.S. government want-
ed to get Alaska more settled, wanted
more people, so the deal years ago was
if you proved up on your homestead you
got the mineral rights to it. In 1959, the
new state government had a different
attitude. The state came back and hung
outrageous bonding requirements on our
homestead acreage if we wanted to drill
for oil or gas.”
“We probably own more oil and gas
mineral rights than any person or com-
pany in the state.”
White said he and his son (also Jim,
but with a different middle name, so not
Jim Jr.) have about 4,600 acres in the
state.
NAPE attendees, he said, were a lot
more receptive this year than I have seen
them in a very long time.”
—KAY CASHMAN
continued from page 10
INSIDERcontinued from page 11
FERC QUESTIONS