Milne Point goes mainstream.

• Author: Tyson, Ray
• Position: BP Exploration (Alaska

Conoco spent millions developing the marginal Milne Point oilfield. BP took it over and is now trying to boost daily production from 20,000 barrels to 50,000 barrels.

On Alaska's North Slope, BP Exploration (Alaska) Inc. is breathing new life into a quirky oilfield that gave previous operator Conoco nothing but headaches for nearly a decade.

Located 35 miles west of Prudhoe Bay field, Milne Point, a geologically complex reservoir adjacent to the Kuparuk field, never performed up to Conoco's expectations, producing barely 19,000 barrels of crude a day in spite of huge capital investments over the years.

Discovered in 1969 and brought into production 16 years later, Milne Point is considered to be a marginal field by North Slope standards, particularly sensitive to oil-price fluctuations. In 1987, Conoco was forced to suspend operations for two years after world oil prices collapsed.

Nevertheless, Conoco stuck with Milne Point, bringing it back on line in 1989 when oil prices increased, while pumping more cash into the troubled project in an effort to improve field performance.

The company also managed to find additional oil accumulations within the current 71,000-acre Milne Point operation unit known as Schrader Bluff and Northwest Milne - discoveries that could have significantly boosted overall production had Conoco fully committed to the project.

"Unfortunately, every year they went to the corporation for capital dollars to expand, they had trouble justifying it because we had never made any money. Conoco wasn't stupid; it just didn't have the dollars," recalls Larry Niles, a former Conoco field hand who now works for BP as a production specialist at Milne Point.

Out on the Edge

Conoco also fought a prolonged and unsuccessful administrative and legal battle against the state over efforts to reduce the high 20 percent royalty rate on Milne Point leases. The smallest producer on the North Slope, Conoco apparently lost its desire to stay with the project.

"It was a tough decision for them, and I think they contemplated it a lot," Niles says. "But BP was in a better profit position with their infrastructure on the Slope. And here's Conoco out on the edge by themselves."

Conoco bailed out of Milne Point in 1993, exchanging the field and its Badami prospect east of Prudhoe Bay for BP properties in the Gulf of Mexico. Alaska's biggest oil producer, BP had a much larger presence than Conoco did on the North Slope, enabling the international oil...