Questions linger for ConocoPhillips on Arctic drilling program following Shell’s OK

Fuel Fix ^ | May 12, 2015 | Robert Grattan

[thackney]

ConocoPhillips CEO Ryan Lance said Tuesday that the Obama administration’s decision to allow a competitor’s Arctic drilling program to move forward has provided some, but not all, of the clarifications they were looking in their own projects in the region.

The U.S. government on Monday gave Shell’s $6 billion plan to explore for crude oil in the northern Chukchi Sea a preliminary OK, reviving exploration plans that have faced significant political, engineering and cost challenges.

Lance said that the go-ahead given to Shell’s program has not resolved all of ConocoPhillips’ Arctic questions.

“A lot of the [regulations] are still subject to interpretation and you really don’t know until you provide a plan of operations to find out if it’s going to meet some of the performance-based requirements,” he said. “We’re trying to digest it, trying to understand it…Our plan for exploration in the Chukchi is different than what other companies are doing so we need to make sure it fits the performance-based criteria they put in the regulation and that’s still bit unknown.”

ConocoPhillips paid about $506 million for 98 exploration leases about 100 miles off Alaska’s north coast in 2008. In April of 2013, the company suspended its plans to drill an exploratory well in the sea, citing uncertainty in regulations.

The Houston-based independent driller has said it will reevaluate its drilling plans when regulations are better defined.

Since then, several other drillers have backed off plans to drilling the Arctic due to high costs, engineering challenges and regulations.

Plans to drill in the Arctic have also had to contend with a collapse in oil prices that has forced most oil companies to pull back on new projects across the globe.

ConocoPhillips has said it will spend $11.5 billion on exploration and production in 2015, down from about $16.7 billion the company spent in 2014. Most of the savings will come as it shifts from pouring money into several massive projects across the globe into seeing those projects become cash generators.

Despite the cuts, ConocoPhillips said it expects to see production grow 2 to 3 percent in 2015. The company produced 1.532 million barrels of oil equivalent per day in 2014, not including its operations in Libya.