OilVoice - Federal Regulators Block ConocoPhillips' Alaskan Drilling Plan

Federal Regulators Block ConocoPhillips' Alaskan Drilling Plan

Monday, February 15, 2010

US federal regulators have rejected an application by industry major ConocoPhillips to construct a series of bridges across the Colville river in northern Alaska as part of its plans to expand drilling on Alaska's North Slope. The central government decision has delayed drilling at the site. Meanwhile, the company is expected to stage an appeal against the decision, which could mean that Conoco has to submit an alternative development plan for the area. If the company decides to use an alternative method of developing the area, such as horizontal drilling, it will need to file a new application with the USACE.

The decision to reject ConocoPhillips' application was announced by the US Army Corps of Engineers (USACE), which is responsible for the licensing of bridges over navigable waters in the US and for issuing permits for the discharge of dredged and fill material. The USACE believes that there are alternative methods of extending drilling that would have far less impact upon surrounding marine wildlife. However, the immediate reason for the rejection was ConocoPhillips' proposal to spread fill material over an area of wetland tundra.

Unsurprisingly, not everybody agrees with the decision. Both Alaskan senator Lisa Murkowski and the governor of Alaska, Sean Parnell, have criticised the USACE's decision and made clear their ongoing support for the project.

ConocoPhillips is one of three major North Slope producers, alongside fellow industry majors ExxonMobil and BP. Back in 2008 the company produced an average of 244,000 barrels per day (bpd) of oil from the operations in its Alaskan portfolio. This figure amounted to 32% of its total crude oil production. The firm also produced just over 1 billion cubic metres (bcm) of gas, or just over 2% of its total consolidated gas production.

Due to the region's testing operating conditions, Alaskan production is proving to be particularly expensive for the company, lifting costs averaging $9.46 per barrel of oil equivalent in 2008, against a worldwide average of $8.20.