Alaska’s North Slope oil patch was Wednesday abuzz with the news “The Beast” – or at least parts of it – had broken free and was loose on the tundra.
It was not good news for ConocoPhilips, the state’s largest producer of crude oil.
The 9.5-million-pound Beast is an oil rig intended to revolutionize oil drilling in the Arctic with an ability to reach horizontally for more than three miles from its pad.
Built by Doyon Drilling, an Alaska Native corporation, the rig weighs “equivalent to almost 10 fully loaded Boeing 747s and (is) one and a half to two times more powerful than other North Slope rigs. (It) is expected to increase oil production by accessing previously unreachable resources without expanding the surface footprint,” Petroleum News reported in December.
Engineering magazine in February touted the rig as an “engineering marvel and…game changer in the oil drilling industry…able to develop 154 square miles of reservoir, which is up to three times more the area where the existing rigs can reach at present. Rig-26 is considered to be immensely powerful and will be able to reach oil levels that have not been touched before.”
How it ended up off the road and stuck there on the frozen tundra of Alaska’s North Slope is at this time unclear, but the accidents stirs memories of BP’s ill-fated Liberty rig.
As the decade of the 2000s was coming to a close, BP was preparing to deploy Liberty with the intent of drilling horizontally for five miles north beneath the Arctic Ocean to reach the offshore Liberty prospect.
“BP is investing $1.5 billion in developing the project,” Offshore Technology reported at the time. “Production from the field is expected to last for 20 to 40 years. BP plans to develop the oilfield from its existing facilities in the Endicott field in Prudhoe Bay. Production from the oilfield will be carried out using the world’s first ultra extended reach drilling (u-ERD) technology.”
That rig too was billed as an engineering marvel designed to handle the immense torque that must be applied to drilling pipe to bend it horizontally instead of simply punching vertically down into the ground.
Some environmental groups worried the new technology could fail. “BP is Pursing Alaska Drilling Some Call Risky,” the New York Times headlined in 2010.
With Liberty on hold, the Center for Biological Diversity petitioned then-Secretary of the Interior Ken Salazar to stop the project after BP’s Macando well blew out in the Gulf of Mexico that year, and the pipe beneath the sunken Deepwater Horizon oil rig began spewing crude into the Gulf of Mexico.
“Relying on dangerous and untested technologies, BP hoped to drill the world’s longest horizontal well off the Alaska coast,” a media release from the group said at the time. “The plan was far from foolproof and, as with BP’s Gulf project, the federal agency that oversees oil activities in Alaska had been far too cozy with the oil companies. In fact, the Interior Department allowed BP to write much of the environmental review for this risky planned project.
“And if something were to have gone wrong at Liberty, whose planned site was in the heart of threatened polar bear country, BP simply does not have the ability to deal with it. No one does. There is not the infrastructure or technology to deal with an oil spill in the Arctic.”
As BP fought for months to shut off a wellhead pumping an estimated 42,000 to 210,000 gallons of crude into the ocean every day, the Liberty project remained on hold. Eventually, the project was abandoned.
The company later sold half its interest in the Liberty field to Houston-based Hilcorp, an independent oil company, and Hilcorp in 2018 secured federal approval to build a gravel island off the coast on which to put a traditional rig to drill vertically,
“The gravel island would be built in 19 feet (5.8 meters) of water about 5.6 miles (9 kilometers) off shore,” the Associated Press reported. “The site is 15 miles (24 kilometers) east of Prudhoe Bay, North America’s largest oil field.”
Work on that project is slated to begin in 2022. Meanwhile, BP – which pioneered Prudhoe – is trying to transfer all of its Alaska assets to Hilcorp and exit the north.
The sale has run into opposition from Alaskans concerned about Hilcorp’s safety record, but appears to be moving forward. The world’s fifth largest oil company, BP publicly billed its departure from the 49th state after 60 years as part of larger corporate realignment.
Privately, employees said the company was tired of dealing with an aging oil field with rusting pipes with no easy means of repair and wrestling with an ever-shifting state tax structure.
ConocoPhillips, on the other hand, has remained nothing but upbeat about prospects in the 49th state.
“ConocoPhillips is increasingly bullish about its western North Slope Alaska projects, where recent drilling has increased resource estimates and lowered expected costs of supply,” S&P Global Platts reported in November.
ConocoPhillips was then touting horizontal drilling as lowering Slope oil production costs to $35 to $40 per barrel. It added, however, that it would need to find partners to help cover the projected $15 billion to $17 billion needed for planned development over the next 10 years.
The Beast’s escape from its trailer can only add to those costs and likely delay its scheduled April start up. And the accident could not have happened at a worse time.
COVID-19 has spooked the investment market, and a battle between OPEC and Russia for control of the global oil market is pushing oil prices to lows not seen since 2002 and 2003.
Analysts are expecting low prices to continue into 2021. And much of the Western world is now largely shut down due to fears of the latest coronavirus.
Clarification: An early version of this story reported the rig was off its trailer, but more detailed photos appear to show it on the trailer but off the road.