ConocoPhillips Says Low Oil Prices Won’t Stop It From Drilling In The Alaskan Arctic

ConocoPhillips has become the first energy company to draw crude oil from the nearly century-old reserve in icy, isolated Alaska.

The Houston energy giant first started pulling commercial crude supplies from the National Petroleum Reserve-Alaska in October, the Associated Press reported Thursday. ConocoPhillip’s million-pound drilling rig will produce 16,000 barrels a day at its peak production and serve as a launch pad for other fields in Alaska’s bone-chilling northern Arctic region.

The company said it was moving forward this project and a second Alaska development despite the recent collapse in oil prices, which has forced energy companies around the world to shelve expensive exploration projects.

“For these kinds of projects, if we can invest in them now, it makes a lot of sense for when the oil price is the other extreme,” Steve Thatcher, the company’s Alpine operations manager, told the AP.

U.S. oil prices have plunged about 70 percent since their June 2014 peak of $105 a barrel. West Texas Intermediate, the U.S. oil-price gauge, was up nearly 1 percent early Thursday to $35 a barrel.

The price plunge has eroded profits and cost tens of thousands of jobs across the industry. ConocoPhillips, the largest U.S. independent oil and gas producer, saw its net loss widen to $3.5 billion in the fourth quarter of 2015, from $39 million a year earlier, the company reported in February. It also lowered its 2016 capital expenditure target to $6.4 billion from $7.7 billion.

For now, the cuts haven’t slowed ConocoPhillip’s work on its second well, the Greater Mooses Tooth 1, which could start producing oil as soon as December 2018, the AP reported.

U.S. President Warren G. Harding first dedicated the National Petroleum Reserve as an emergency oil supply for the U.S. Navy in 1923. ConocoPhillips said it spent more than a dozen years and in excess of $1 billion to secure permits for the development and complete the North Slope facility, the AP reported.

Finishing the Colville-Delta 5 project required compromising with Alaska Natives, who fought to ensure the project would supply financial benefits like taxes and jobs, and guaranteeing environmental protections. The U.S. Bureau of Land Management, which controls the Alaska reserve, has set aside 12 million acres available for development while preserving 11 million acres for wild animals and grazing.