Conoco Protecting Competitive Advantage. Large PFD Likely.

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Today’s Key Takeaways:  Conoco Phillips moves to protect well data. Japan looking to support U.S. LNG. Busy exploration time in Niblack and Hyder. Tentative AK budget deal reached with minimum $3000 PFD.


ConocoPhillips sues Alaska agency to keep well data from giant North Slope oil discovery secret
Alex DeMarban, Anchorage Daily News, May 18, 2022

ConocoPhillips is suing the state of Alaska to stop it from publicly releasing well data associated with its huge Willow oil discovery, located on the western edge of the state’s North Slope oil fields.

State law requires that data associated with wells be made public after two years, with minimal exceptions.

But ConocoPhillips is arguing that the wells were drilled in the National Petroleum Reserve-Alaska, and are therefore subject to federal laws around confidentiality, not state laws, said the 17-page complaint, filed in U.S. District Court in Anchorage.

The Alaska Oil and Gas Conservation Commission, the state agency that permitted the wells in the reserve, will publicly release the data unless it is stopped from doing so by a court decision, the complaint says.

In its lawsuit, the oil company says it has spent tens of millions of dollars to acquire its leases and could lose its competitive advantage if the well data is released. The data contains valuable trade secrets and other proprietary information, the company argues.

The five wells named in the complaint were drilled in 2018.

The release of the well data has been in dispute after ConocoPhillips asked the Alaska Department of Natural Resources to extend the state’s confidentiality period. The agency denied the request.

Federal law would allow the well information to be kept confidential for a longer period, the life of the leases that ConocoPhillips acquired from the federal government, the company argues. The federal government issues 10-year oil and gas leases, which companies can renew.

Willow could produce 160,000 barrels of oil daily and about 600 million barrels over three decades. ConocoPhillips has not made a final decision to build the project, potentially a $6 billion endeavor. The project is undergoing additional environmental review under the Biden administration after a federal judge rejected permits approved by the former Trump administration.

The complaint says when Congress in 1980 authorized private leasing in the 23-million-acre reserve, it wanted to keep leaseholders’ information confidential.

Without a judge’s order stopping it, the Alaska Oil and Gas Conservation Commission “will continue its unlawful attempt to publicly disclose (the well data) by seeking to enforce state laws and regulations in a manner that is expressly preempted by and conflicts with federal law, and impermissibly interferes with Congress’s important objectives,” the lawsuit says.

Rebecca Boys, a spokeswoman with ConocoPhillips, said the question of confidentiality involving federal leases is a matter of federal law for federal courts to decide.

Dan Seamount, a member of the commission, said the agency could not comment while the matter is in litigation.

ConocoPhillips’ bid to keep the information confidential echoes the successful efforts by different companies decades earlier to protect the confidentiality of data associated with the only well drilled in the Arctic National Wildlife Refuge, another large tract of federal land on Alaska’s North Slope.

The results of that so-called KIC-1 well, drilled in the mid-1980s, were provided to the Alaska oil and gas commission. But BP Alaska, Chevron and Arctic Slope Regional Corp., an Alaska Native corporation, fought in state court to keep the information from being publicly released.

In 1992, the companies reached a settlement with the state that allowed limited disclosure to key officials within the Alaska Department of Natural Resources, primarily experts in the oil and gas division. The findings of that well have been a closely guarded secret ever since, although a New York Times investigation in 2019 suggested the results weren’t promising.


Canada can boost oil output by 900,000 barrels a day: Kenney
Robert Kenney, Bloomberg BNN News, May 18, 2022

Canada’s oil production could increase by 900,000 barrels a day to make up for supply losses from Russia’s war in Ukraine, according to the premier of the province of Alberta.

Premier Jason Kenney gave the estimate in testimony before a U.S. Senate committee on Tuesday. It’s about triple the estimate delivered weeks ago by Canadian Natural Resources Minister Jonathan Wilkinson.

About 300,000 barrels a day of unused capacity exists in the North American pipeline system, which should be filled this year through higher output, Kenney said. Another 200,000 barrels of crude oil could be shipped by rail and “if midstream companies get serious about it, and if regulators approve it,” a further 400,000 barrels could be added through pipeline reversals and technical improvements. 

Boosting Canada’s oil output by that amount would not happen quickly. Canada exported about 3.9 million barrels a day of crude oil to the U.S. in the first two months of the year, according to data from the U.S. Energy Information Administration — the bulk of the country’s production. 

By 2024, the completion of the Trans Mountain pipeline expansion project to British Columbia will give Canada even more capacity to ship oil to the US, Kenney said in an interview on Bloomberg Television. “My point is, let’s be visionary about this. Let’s have a North American energy alliance, and let’s get another major pipeline done because we’ve got the third-largest reserves on Earth up in Alberta,” he said. 

Energy producers can raise shipments of crude by 200,000 barrels a day and natural gas by the equivalent of 100,000 barrels by year-end by accelerating planned projects to expand output to help compensate for the loss of Russian supply, Wilkinson said at a March 24 press conference in Paris.


Japan eyes support for US LNG project expansions to shore up its energy needs
Larry Persily, Alaska Journal of Commerce, May 17, 2022

Japan has long placed a priority on securing energy for the islands nation, which has little of its own fossil fuel resources and no pipelines to crude oil or natural gas suppliers.

A pair of Japanese utilities helped pioneer the seaborne trade of liquefied natural gas when they signed a long-term contract in 1967 to take gas from the LNG plant that would be constructed in Nikiski, on the east side of Cook Inlet. It was the second LNG plant in the world, and the only one on the Pacific for years. It closed after nearly a half-century of production.

Now, with global LNG supplies tight, Russian gas of questionable political longevity and most of its nuclear power plants still closed after the 2011 Fukushima plant disaster, the Japanese government is looking to North America for help to meet its supply needs.

The government is looking to help finance expansion of existing U.S. Gulf Coast gas liquefaction plants as among the quickest options for long-term delivery of more of the fuel to the nation of 125 million people.

Japan is not moving away immediately from taking Russian LNG but is looking for alternatives.

“The U.S. has expansion plans at existing projects, which could boost production in a relatively short period of time, and Japanese companies are showing interest (in those projects),” Minister of Economy, Trade and Industry Koichi Hagiuda said at a press conference in Tokyo on May 10.

“Japan intends to contribute to starting up these U.S. projects with public financial support and proceed to cooperate with the U.S. in order to stabilize global LNG supply,” he added.

Hagiuda visited the U.S. and met with Energy Secretary Jennifer Granholm on May 4.

“We expressed our intention to cooperate in areas including upstream investments during the discussion,” he said of his meeting with Granholm.

With six LNG export terminals in operation on the Gulf and East coasts, the U.S. was Japan’s fourth largest LNG supplier in 2021, accounting for about 10% of Japan’s total LNG imports of just over 74 million tonnes that year. Russia, with its two export terminals, supplied 9% of Japan’s LNG imports and was the nation’s fifth-largest supplier, according to data from the Ministry of Finance.

State-owned Japan Oil, Gas and Metals National Corp., known as JOGMEC, is the likely candidate for investment in new U.S. LNG supply. The company provides equity capital for Japanese companies’ oil and gas exploration and production work, as well as loan guarantees to support financing.

JOGMEC’s support to bring more U.S. gas to Japan is expected to go toward existing projects where Japanese companies already are involved, which includes two on the Gulf Coast: The Sempra-led Cameron LNG terminal in Louisiana, and Freeport LNG in Texas.

Participants in Cameron, which started up in 2019, include trading houses Mitsui and Mitsubishi as well as marine shipper Nippon Yusen Kabushiki Kaisha (NYK Line). At 12 million tonnes annual production capacity, the partners are looking at a more than 50% expansion, targeting an investment decision next year.

On the Pacific, Mitsubishi is a partner in the Shell-led LNG project under construction in Kitimat, British Columbia. The terminal is expected to start shipments in 2025, with expansion possible.

Osaka Gas and LNG importer JERA, a 50-50 joint venture between Tokyo Electric Power and Chubu Electric Power, are among the participants in Freeport LNG, which is planning an expansion to add 5 million tonnes to its current annual production capacity of 15 million tonnes. The terminal shipped its first cargo in 2019.

While turning more toward U.S. projects, JOGMEC, along with Japanese trading house Mitsui, jointly hold a 10% stake in the Arctic LNG-2 project which is under construction in Russia’s far north, with a scheduled start-up date next year.

Western sanctions against Russian companies, however, could delay the equipment, expertise and financing needed for the project to reach its full build-out capacity of almost 20 million tonnes per year, which the lead partner, Russian gas producer Novatek, had expected to reach by 2026.

The Japan Bank for International Cooperation in 2021 signed on to participate in almost $1.8 billion of project financing for Arctic LNG-2, joining Chinese, Russian and other banks in the package.

“Considering the future demand for LNG in our nation and the world, we have to move ahead with this project,” Mitsui CEO Kenichi Hori said of the Russian project at a May 2 news conference. “Otherwise, the world’s energy balance will collapse, or there will be shortages.”

Japanese companies also hold stakes in Russia’s first LNG export plant, Sakhalin-2, on Sakhalin Island, about 800 air miles north of Tokyo. The plant, which sent its first cargo to Japan in 2009, includes Mitsui and Mitsubishi among its partners.

Russia’s second LNG project, Yamal, started operations in 2017. Although no Japanese company owns a stake in the project, the state-run Japan Bank for International Cooperation helped with financing the development, which is majority owned by Novatek, the same company leading the Arctic LNG-2 project.

And while the Japanese government is looking to help finance additional U.S. LNG capacity, Prime Minister Fumio Kishida told reporters on May 9 the country would maintain its stakes in oil and gas production at Sakhalin-1 and Sakhalin-2 in Russia.

He had told an online meeting of the leaders of the Group of Seven countries a day earlier that Japan will ban Russian crude oil imports “in principle” as part of a G-7 campaign. But it will take time, he said.

“We will take steps to phase out imports in a way that minimizes the adverse impact on people’s lives and business activities,” Kishida told reporters.

In addition to funding from the Minister of Economy, Trade and Industry, Japanese companies Itochu, Japan Petroleum Exploration Co., Marubeni and Inpex have stakes in Sakhalin-1, which was operated by ExxonMobil until it decided to exit from Russia.

The U.S. is expected this year to claim the title of world’s largest LNG exporter, a fast rise to the top after the first Gulf Coast exports in 2016, fueled by booming shale gas production and about $100 billion in investment in liquefaction capacity, storage tanks, docks and jetties, and pipelines to deliver feed gas.

A seventh U.S. export terminal came online earlier this year, with two more under construction on the Gulf Coast.


Niblack, Hyder exploration soon to begin
A.J.Roan, North of 60 Mining News, May 12, 2022

Blackwolf Copper and Gold Ltd. May 11 reported an update for the 2022 exploration on its Southeast Alaska projects, including a multi-phased exploration campaign at Niblack, a maiden drill program at Cantoo, and continued reconnaissance of the Texas Creek and Casey properties.

“Blackwolf is looking forward to a year with numerous catalysts including discovery-focused exploration at our flagship, Niblack copper-gold-silver-zinc VMS deposit, and an upcoming, updated mineral resource estimate incorporating recent drilling and our comprehensive new geological interpretations,” said Blackwolf Copper and Gold CEO Rob McLeod. “Additionally, we are looking forward to drilling the initial holes into the outcropping gold-silver veins, which are up to 30 meters wide at our new Cantoo property, located just west of the Premier Mine currently in construction by Ascot Resources.”

Located at the southern end of the Alaskan Panhandle, on Prince of Wales Island, the Niblack property hosts 5.64 million metric tons of indicated resource averaging 0.95% (118.1 million pounds) copper, 1.74 grams per metric ton (317,220 ounces) gold, 29.5 g/t (53.5 million oz) silver, and 1.73% (215 million lb) zinc; plus 3.39 million metric tons of inferred resource at 0.81% (60.7 million lb) copper, 1.33 g/t (144,710 oz) gold, 20.1 g/t (2.19 million oz) silver, and 1.29% (96.3 million lb) zinc.

The company is currently planning a multi-phased exploration campaign that will include diamond drilling, focused on both resource definition and exploration at Niblack, as well as the maiden diamond drilling program targeting wide, outcropping veins and breccias at the Cantoo gold-silver property in the Golden Triangle, near Hyder, Alaska.

Acquired through staking in 2021, the Hyder properties comprise three claim groups – Texas Creek, Cantoo, and Casey – totaling 3,874 hectares (9,573 acres) across 474 federal mining claims.

These properties are located on the Alaskan side of the Golden Triangle, northwest of the town of Hyder and tidewater. The properties also lie south of the past-producing Granduc Copper and Scottie gold mines and west of the past-producing Premier, Big Missouri, and Silver Coin gold-silver mines in British Columbia.

Ultimately, very limited modern exploration has been undertaken in the area, with virtually none in the last 25 years.

Permit applications for planned work on both the Niblack and Hyder projects have been submitted to the U.S. Forest Service. Both applications have completed the environmental review and public scoping process, and Blackwolf anticipates the receipt of a decision memo regarding the projects shortly.

“We appreciate our shareholders’ patience during our various permitting processes and Niblack site upgrades,” added McLeod. “It is our commitment to operate safe, clean and low-impact projects in Southeast Alaska. We are now set up to rapidly advance one of the largest, undeveloped underground copper-gold deposits in the pacific northwest.”


Alaska House, Senate negotiators reach tentative budget deal
Becky Bohrer, Associated Press, May 18, 2022

Alaska lawmakers tasked with negotiating a budget deal reached a tentative agreement Tuesday that would pay residents more than $3,000 this year, but the final amount would depend on whether the Legislature can muster the votes needed to access a key savings account.

The tentative agreement calls for a dividend from the state’s oil-wealth fund in the range of $2,500 this year, plus a $1,300 “energy relief” check. However, half the funding for the energy check would come from a budget reserve account that requires three-fourths support in each the House and Senate to access.

Payments to residents could be around $3,200 or they could be around $3,850 depending on whether the vote threshold is reached, according to estimates shared with reporters by Senate Finance Committee Co-Chair Bert Stedman’s office.

Stedman, a Sitka Republican, chaired the conference committee, which met for the first time Sunday and announced the tentative agreement Tuesday, the day before the legislative session was scheduled to end. The negotiated package is subject to a vote by the House and Senate.

Stedman said the budget is a good one, with a “healthy dividend,” capital projects around Alaska and attention to K-12 education and the university system. He said the dividend is a “sensitive issue” to negotiate, with splits among lawmakers over what the size should be.

The House in its version of the budget approved a dividend of about $1,250 plus a $1,300 energy check. The Senate Finance Committee, in the version of the budget it sent to the Senate floor, proposed a roughly $2,500 dividend.

The Senate version of the budget, however, was amended during floor debate to include a dividend of about $4,200 this year from the earnings of the Alaska Permanent Fund, an amount in line with a long-standing dividend formula last used in 2015, along with a $1,300 energy check.

The House rejected the Senate package Saturday, which led to the appointment of House and Senate negotiators tasked with trying to reach a compromise spending bill.

Many lawmakers consider the formula unsustainable, particularly since the state has come to rely on permanent fund earnings, long used to pay dividends, to also help fund government. But lawmakers have not agreed to a new formula and instead have been setting the yearly amount, resulting in often drawn-out, divisive debates. Last year’s check was $1,114.

When lawmakers began using permanent fund earnings to help pay for state expenses, they sought to limit how much money could be withdrawn each year for dividends and government. The limit is based on a percentage of the fund’s market value. The draw for the upcoming fiscal year is about $3.4 billion.

Gov. Mike Dunleavy has called for an approach that would split what is drawn 50/50 between dividends and government. A roughly $2,500 dividend is in line with that approach. He also called for a supplemental dividend of about $1,250, citing high fuel and food costs.

Sen. Bill Wielechowski, an Anchorage Democrat, supported the higher dividend passed by the Senate. But he said the amount the conference committee settled on was “the best we could get.” Wielechowski was on the conference committee.