ConocoPhillips Alaska Inc. is moving forward at the Greater Mooses Tooth unit.

The company has officially approved funding for the GMT-1 project, which will become the first oil development exclusively within the National Petroleum Reserve-Alaska.

The $900 million project will include construction of a gravel drilling pad, a 7.7-mile road and associated facilities and pipeline and an initial drilling program of nine development wells. The GMT-1 pad will have the capacity for as many as 33 wells.
Construction is scheduled to begin in early 2017 and continue through 2018. The project is expected to employ approximately 700 people each winter, at its peak, plus support positions. The company expects to bring the GMT-1 pad into production in late 2018.

Read more here.

Two projects in Interior Alaska are moving forward thanks to a supportive tax policy.

Ahtna will begin drilling a gas well 10 miles west in Glennallen in February on state-owned land it leased two years ago. The Tolsona Oil and Gas Project has most permits in hand, finished its preliminary engineering on a well design and pre-qualified for New Frontier Basin Oil and Gas Tax Credits. The next steps involve acquiring a drill rig, building the access road and drill pad, finalizing permits and well design and selecting contractors and vendors for the project.

“Exploration incentives such as the New Frontier Basin Tax Credits provide critical inducements to companies such as Ahtna to invest in natural resource exploration and development,” Ahtna President Michelle Anderson testified during SB 21 discussions.

Interestingly, the new guy in charge of Ahtna’s businesses is an old friend of ours – Tom Maloney, formerly Alaska Area Manager for CH2MHILL and a long-time steering committee member for both Make Alaska Competitive and KEEP Alaska Competitive.

Doyon, Limited has decided to accelerate its oil and gas exploration program in the Nenana basin with 2-D seismic testing in a large area north of more recent operations.

Crews will begin mobilizing in early January for this 160-mile program, which will continue into April 2016. This effort is part of Doyon’s long-term exploration program in this 1,200-square mile frontier basin in Interior Alaska located west of Fairbanks and parallel to the Parks Highway. Doyon is the sole lessee of approximately 400,000 acres of state oil and gas leases in the Nenana basin and owns the subsurface, including oil and gas rights, to an additional 42,000 acres.

The NPR-A was created by President Warren G. Harding in 1923, when the United States was converting its navy to run on oil rather than coal.

Tax credits can make or break a project, particularly for the little guys. Here’s a sampling of comments on the subject.

“Bottom line is, we can’t commit to Cosmopolitan gas development unless we have either the existing tax credits or a reasonable alternative. We just need some stability. We need to know what it is we’re dealing with. We can’t have uncertainty on this.” – Benjamin Johnson, BlueCrest Energy

“Given ongoing debates about oil tax reform in Alaska, it is important to understand how SB 21 has impacted this situation. The credit programs that create this flow of cash to small producers are a legacy that precedes SB 21 by many years.” – Enalytica

“The tax credit (incentive) system has done exactly what it was intended to do in Cook Inlet. It has attracted new investment and reaffirmed public confidence in Cook Inlet.” – Corri Feige, Director Alaska Division of Oil and Gas

“We would not be drilling these wells without the tax credits. Our entire financing structure is built on these.”- Pat Galvin, Great Bear Petroleum

Milne Point

Hilcorp’s recent investments and activity are just a portion of the positive things SB 21 and effective tax credits have brought to Alaska.

Recently closing the company’s fourth major acquisition in the state in less than four years, Hilcorp is on pace to invest an estimated $340 million in 2015 alone. The goal of those investments – more oil and gas production.

Hilcorp’s progress in Cook Inlet has helped restore confidence in what was a bleak energy outlook for Southcentral Alaskans. In fact, right now the company is making commitments to local utilities that extend to 2023.

Hilcorp hit the ground running on the North Slope, too, recently standing up a new, more efficient automated service rig (ASR #1) that’s helping repair and improve well performance, and drilling new wells at Milne Point with the Nordic 3 Rig.

While there are a lot of good things happening in the field, there’s no doubt that the industry is struggling with low oil prices and Hilcorp is no exception. However, the company remains focused on controlling costs and building efficiencies that will help maintain field activity that supports hundreds of jobs here in Alaska.

BlueCrest Energy is full-speed ahead with an ambitious development plan on its Cosmopolitan Unit off Anchor Point.

The three major producers all said tax reform would lead to more investment.

And it has; some $5 billion pledged to date.

One of the most active is ConocoPhillips Alaska, which recently staked seven well locations in its Greater Mooses Tooth Unit in the National Petroleum Reserve-Alaska (NPR-A).

ConocoPhillips has also begun development drilling at its CD5 drill site on the North Slope. CD5 is the first oil development within the boundaries of the NPR-A and first oil is expected in the fourth quarter of 2015.

Click here to read more.

By Pat Foley

Caelus senior vice president of Alaska operations
Let’s look at why tax reform is working for Alaska, and why voters made the choice to give oil tax reform a chance to work.
First of all, Alaska is benefitting from exciting new investment in our oil patch since the tax law passed. Overall, the new projects that have been announced since SB 21 became law add up to more than $5 billion dollars. That is especially good news during a time of low oil prices, when other oil provinces have seen large lay-offs and a significant slow-down in activity. You asked for specifics, so here is what SB 21 means to a new company in Alaska.

Caelus is in Alaska due largely in part to the passage of SB 21. Historically an international exploration company, the move to a more stable and competitive fiscal system attracted the attention of our company and investors. We purchased the Oooguruk Unit in April of 2014. Since then, we’ve been very busy:

• We sanctioned the Nuna project, a $1.5 billion new oil development and spent millions in installing the gravel road and initial drill site pad in 2015. First oil is expected in 2017.
• Caelus was one of the largest lease buyers during the fall 2014 lease sale, acquiring 323,000 new acres. This past winter we acquired new high-resolution, 3D seismic over both Nuna and our new leasehold in the east.
• Lastly, Caelus acquired a 75 percent working-interest ownership this summer in leases located in a highly prospective area known as Smith Bay in the shallow State waters outboard of NPRA. The company is fast at work preparing to drill up to two exploration wells this winter season.
  As these projects move into the production phase, Alaskans will get the benefit of more oil moving down the Trans-Alaska Pipeline System and will enjoy royalties and production taxes that flow from these ventures. More activity and production means more jobs and a better outlook for the funding of public services, like education, healthcare and public safety.

The activities on the Slope are reason enough to be optimistic about Alaska’s future, but when you add in the fact that State revenues also look better under SB 21 compared to the previous regime, voters look even wiser. The new tax law was designed to protect the State’s pocketbook at low oil prices. When prices drop, as they have in the last year, the State collects more in revenues that it otherwise would have due to the gross minimum tax floor. One estimate puts the additional revenues made possible by oil tax reform at almost $1 billion over the next two years! Prices are still low, so Alaska’s revenue shortfall is still a challenge; but tax reform improved the situation markedly.

SB 21 is working for Caelus and other companies new to Alaska, and it’s working for Alaskans.