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BP/Arco spending: Arco and BP, the state's two largest oil operators, are boosting 1993 capital investments to more than $1 billion.

The state's two largest oil producers, BP Exploration and Arco Alaska, plan to spend an estimated $1.2 billion on projects in 1993, representing about a 10 percent increase in capital investment over last year. The lion's share is earmarked for the North Slope, the nerve center of Alaska's oil industry. And millions more will be paid out in 1993 by Exxon, Alaska's third largest producer, and other owner companies that share in the cost of developing and maintaining various oil fields.

BP, who operates the western half of Prudhoe Bay and the offshore Endicott field, will spend from $650 million to $700 million in 1993; Arco, who operates the eastern half of Prudhoe and the Lisburne and Kuparuk fields, will kick in from $500 million to $550 million. While the largest share of expenditures will go toward field work, a considerable amount of effort will be invested in searching for oil to replenish dwindling reserves.

Arco's Five-Year Plan. The state's most aggressive explorer, Arco reportedly will spend about $186 million on exploration in 1993 as part of a five-year, $600 million program.

Arco is operating six rigs on the North Slope this winter to drill seven exploration wells. This includes three wells in the Colville Delta to further evaluate two oil discoveries announced in late December. Additionally, two wells will be drilled in the foothills of the Brooks Range south of the Kuparuk field, one at the recently formed Jones Island Exploration Unit in the Beaufort Sea, and one on the north fringe of the Prudhoe Bay field.

Another major Arco project is the Point McIntyre field, scheduled to come on line in third quarter 1993 with initial daily production of 40,000 barrels, ramping up to about 90,000 barrels within six months of startup.

While capital spending will increase in 1993, "There have been significant operational cuts," notes Susan Reed, Arco's manager of Media Communications. In the wake of increasing costs and decreasing production, both Arco and BP have reduced staff and consolidated some services.

Arco also plans to drill one or two wells next summer to delineate its Kuvlum discovery in the eastern Beaufort Sea and to continue work on its Sunfish discovery in the Cook Inlet.

BP Returns to Exploration. BP's 1993 Alaska business plan calls for an increase in exploratory drilling following several lackluster years. After drilling no wildcats in 1992, the company is hoping to drill 10 wells through 1995.

Paul Laird, BP's associate director of Public Affairs, says the company will focus exploratory drilling in central North Slope areas that are relatively close to existing production facilities. In recent years, BP has avoided costly offshore drilling and other remote, high-risk areas.

Says Laird, "We have a real strong focus on getting the most out of what we already have."

While BP's oil production rate in Alaska is expected to decline by about 7 percent to 8 percent a year, the company says 75 percent of the loss could be replaced if reserve targets are met over the next five years. Roughly half of BP's worldwide production comes from the North Slope.

BP's business plan lists 44 North Slope projects designed to increase reserves and maximize the value of its assets.

At Prudhoe Bay, which accounts for about three-quarters of North Slope crude production, major projects for the owner companies include installation of gas handling facilities to increase oil recovery, infill drilling, waterflood expansion and expansion of the Enhanced Oil Recovery (EOR) program. Such projects have boosted estimated recoverable oil reserves at Prudhoe from 9.6 billion barrels to over 12 billion barrels, while keeping the nation's largest oil field from lapsing into steep decline.

Says BP's Laird, "I think you are going to see in 1993 and onward a lot more focus from us on how we are moving forward than how we're cutting back."
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Title Annotation:BP Exploration Alaska Inc.; Arco Alaska Inc.
Author:Tyson, Ray
Publication:Alaska Business Monthly
Date:Feb 1, 1993
Previous Article:Some winners, some losers: Alaska's oil industry review and forecast.
Next Article:The Clinton question: will the new administration in Washington, D.C., lock up Alaska oil development?

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