Juneau, Alaska

(907) 699-6788 ed.king@kingecon.com

The Official FY19 Oil Production Numbers are in

The Alaska Oil and Gas Conservation Commission (AOGCC), the state agency which tracks oil production across Alaska, has released the last of the FY19 oil production data.

All production companies are required to report the amount of oil, gas, and water they take out of the ground to AOGCC each month. Those numbers are all public information, free to download from the most user-friendly front-end database interfaces I work with. You can find it here.

This is the single best resource for understanding what is happening on the North Slope. While other state agency report numbers relevant to their own mission, it is the AOGCC data that should be considered the official government numbers.

So, let’s take a closer look at what those data show during fiscal year 2019.

Big Picture

CSV  

The graphic above shows how oil flowed during the last two fiscal years and just how large of an impact seasonal maintenance has on total production. The summer months regularly post a 25% drop in production when crews can get out to work on the facilities.

The graphic also show that the Prudhoe Bay, Kuparuk, and Colville River units clearly continue to dominate the conversation. In fact, Prudhoe Bay alone represents a little over half of all the oil production from the North Slope.

But it’s a little difficult to compare the year to year totals on those graphics. So, I’ll rearrange the data for a better view.

It should have been obvious at any point in FY19 that production was coming in below the FY18 levels. When you add up all those barrels, you get this:

FY18 Production (bbls.)   189,813,414
FY19 Production (bbls.)   184,719,187
Difference (bbls.)     (5,094,227)
Decline Rate -2.7%

If you like your oil production numbers is daily averages, that’s 520,037 in FY18 and 506,080 in FY19 (a reduction of 13,957 barrels per day).

Naturally, the question is “where did this decline happen?”

Prudhoe Bay

The largest oil field in Alaska posted a decline rate of 2.2% in FY19. That represents a reduction of just under 1.7 million barrels of oil.

Holding a field of this size to a decline of only 2.2% is an amazing feat. And, impressively, the operator has been able to maintain this small decline for a few years now.

Historically, the field was declining at over 5% per year. But, with good facility management and innovative rate replacement activities, BP has done an admirable job for Alaska.

It’s hard to overstate the importance of curbing the decline rate, but let me spell it out. If Prudhoe Bay had declined at the historic 5% rate rather than the 2% rate we saw, we would have seen 3 million less barrels of production last year.

That would be the equivalent of losing all of the production from Oooguruk. Or, put differently, reducing the decline rate at Prudhoe had the same impact on total ANS production as bringing GMT1 online last year.

So, when I said that a smaller decline rate is equivalent to a production increase, I wasn’t blowing smoke. It’s a numerical fact.

PBU Satellites

It must be difficult living in the shadow of a giant. While we often talk about the Initial Production Area (IPA) at Prudhoe Bay, the 11 satellite fields within the unit are often overlooked.

At nearly 6 million barrels of production last year, the Point McIntyre pool actually outproduced Nikaitchuq. Over at the Lisburne Pool, its 4.2 million barrels last year was more than North Star.

Meanwhile, at just about 2 million barrels apiece, the Aurora, Borealis, Orion, and Polaris pools each contributed almost as much production as Point Thomson, and far more than Badami.

Of interest, Point McIntyre, Aurora, and Orion all posted increases last year. These additional barrels bring the unit total decline to 1.9%.

Kuparuk River Unit

Meanwhile, Alaska’s second largest oil field declined by a massive 12.1% in FY19. That adds up to a year-over-year reduction of nearly 4 million barrels of oil.

The 5 satellite pools in the Kuparuk River Unit offset about half of those losses. Well, West Sak did the heavy lifting.

Meltwater, Tabasco, and Tarn each posted losses – a combined 330,000 barrels less than the year before. Meanwhile, the Torok oil pool doubled its production rate from 354 BOPD to 738 BOPD (a total of 140,000 barrels on the year).

But it was the West Sak pool that provided the saving grace for the unit. The 1H drill pad, which started production from the West Sak formation in November 2017, produced 4.4 million barrels of oil (12,000 barrels per day) in FY19. That’s up from 1.6 million barrels in FY18.

I’ve heard rumors that the company may be trying to enter the West Sak pool from more new locations. They have also spoken publicly about exploring new opportunities (Cairn) within the unit and have applied to add their recently acquired Nuna prospect to the unit.

So, here’s hoping that they will stem the decline over the next few years. But, for now, the Kuparuk River Unit posted a net decline of 4.4% last year.

Colville River Unit

The Colville River Unit totaled 19 million barrels of oil production last year, 16 million of which came from the main Alpine field. This is a huge 4 million barrel reduction (19% decline) from FY18.

This decline appears to have two causes. First, the fiscal year started with a much deeper summer shutdown than the year before. Those first two months account for 1.4 million barrels of the reduction.

Second, the new production that was brought online from CD5 has begun its fastest period of decline.

The good news is that the rig is scheduled to return to the unit this fall, drilling out the second CD-5 expansion. In addition, we should see the new Extended Reach Drilling (ERD) rig arrive later this year. In other words, this type of decline should not be repeated next year.

Milne Point Unit

Hilcorp has been doing a tremendous job squeezing additional life out of this mature asset since purchasing it from BP.

Notice that production beat the previous year in every month of the year, except July. Toward the end of the year, an uptick in production is clearly visible. That is mostly coming from the addition of the “Moose Pad.”

All told, 8.3 million barrels were produced from Milne Point in FY19. That’s a million barrels more than in FY18.

Nikaitchuq

ENI is the operator of the Nikaitchuq Unit, an island production pad sitting a few miles offshore. This is one of the newer units on the North Slope, starting production in 2011. The field is currently producing just a little under 20,000 BOPD.

They ran into a some unexpected maintenance issues last winter, so production declined a little more than it should have. That just means that we will probably see a smaller decline next year.

The field produced 1.3 million barrels less than the year before (19% decline), with about 500,000 barrels due to the unplanned downtime.

Oooguruk

Oooguruk is another offshore field, and is another of the newer additions to the North Slope. They starting sustained production in 2009 and are currently producing about 10,000 barrels per day.

The field declined by almost a million barrels last year, a staggering 21% decline.

But, the field was sold to ENI last year, who will look to improve the rate and shift processing over to the Nikaitchuq facilities. Here’s hoping.

North Star

The North Star field isn’t quite as new as the other two offshore units, but it does have a lot in common with them. After starting regular production in 2001, the field is already nearing the end of its economic life. It is currently producing about 10,000 barrels per day.

However, Hilcorp has a talent for getting oil out of fields that others are ready to give up on. In fact, the North Star Unit saw an increase of 317,587 barrels of oil (a 9% increase) over FY18.

Duck Island Unit

In 2019, Hilcorp was able to maintain a fairly flat production rate at Endicott. Despite a lower winter rate, smaller summer disruptions meant that production ending up almost exactly the same between the two years.

At only 7,000 barrels per day, it’s unclear how long this field will continue to produce. But there are no plans in the works for increasing that rate. Holding it flat is about as good as we can hope for.

Point Thomson

Point Thomson has been having troubles since it was brought online. The field is losing money and is only in production because of an obligation Exxon et. al. made to the State in order to keep the leases.

The real prize at Point Thomson in the natural gas. But, without a gas pipeline, there’s no way to monetize it. So, they continue to cycle natural gas liquids in the meantime, pulling off the few thousand barrels per day of oil condensate that comes up with the natural gas.

The good news is that the work on the compressors last summer allowed them to get production up to the target rate for a few months. However, recent production data indicate there may still be issues to resolve.

The field produced a total of 2.2 million barrels is in FY19 – despite being offline for the first 3 months of the fiscal year. That’s up slightly from the 1.6 million barrels of condensate they produced the year before.

Of note looking forward, a third-party has farmed-in to produce the conventional oil plays within the unit. We wish them luck in those endeavors.

Badami Unit

The smallest producing unit on the North Slope is Badami. It has been a little bit of a disappointment since it began regular production back in 1998. Although the resources are there, they are very difficult to produce. As a result, the unit has changed hands a few times and no one has been willing to invest a lot of money trying to get it to work.

There was a little bit of good news last year. A new well was drilled last summer and is successfully producing. While we don’t know if that success will lead to more investment, we do know that the new well doubled the production from the field. Not too shabby.

Greater Moose’s Tooth

The GMT1 development went into production in October. That new field within the NPR-A produced 3 million barrels of oil in FY19, and is already generating some additional state revenue.

The pool is already producing about 12,000 barrels per day, and that number should double by the time all the wells are drilled.

A second pool in the unit (GMT2) is also being developed. So, expect to see more additional barrels in the years to come.

Grand Total

When you add it all up, here is how thing shook out in FY19:

And, if you like the numbers, here you go:

Unit FY18  FY19  Delta 
PRUDHOE BAY98,810,436 96,900,427 (1,910,009)
KUPARUK RIVER40,579,407 38,758,697 (1,820,710)
COLVILLE RIVER23,563,553 19,115,374 (4,448,179)
NIKAITCHUQ7,093,266 5,765,118 (1,328,148)
MILNE POINT7,304,817 8,322,005 1,017,188
OOOGURUK4,251,285 3,339,428 (911,857)
NORTHSTAR3,606,412 3,923,999 317,587
ENDICOTT2,611,519 2,689,365 77,846
PT THOMSON1,648,561 2,230,207 581,646
BADAMI339,381 663,945 324,564
GREATER MOOSES TOOTH4,777 3,010,622 3,005,845
Total189,813,414 184,719,187 (5,094,227)

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