Italian producer brings new North Slope oil field online OFFSHORE: Nikaitchuq is expected to produce for more than 30 years.

Alaska's newest oil field has started up.

Eni Petroleum has begun production from its Nikaitchuq oil field just off the northern coast, the Italian major said Feb. 9 from its Milan headquarters.

The announcement makes Eni the fourth oil field operator on the North Slope after BP, Conoco Phillips and Pioneer Natural Resources, and the first company aside from BP or Conoco to own and operate a production facility on the Slope.

Eni expects Nikaitchuq to produce for more than 30 years, peaking at 28,000 barrels per day, and estimates that the field contains 220 million barrels of recoverable reserves -- a big field by global standards but medium-small by North Slope standards.

Nikaitchuq is the first Arctic project completely owned and operated by Eni, although the company has Arctic experience through its partnerships with Statoil of Norway.

Eni is still in the early stages of developing Nikaitchuq, having drilled only 12 of the 52 wells it plans to complete by 2014. The company is drilling 22 wells from an onshore pad at Oliktok Point and the remaining 30 wells from an offshore pad near Spy Island.

Eni considers some of the wells to be "leading-edge" because they extend 4,000 feet vertically and up to 20,000 feet horizontally.

A subsea pipeline bundle that Eni claims is "the heaviest bundle ever installed in the Arctic" connects the onshore and offshore sites. Eni commissioned two process and utilities modules, each 4,000 tons, in Louisiana and built 22 modules in Alaska.

The new processing plant, now online, can handle up to 40,000 barrels per day of heavy crude with sand and up to 120,000 barrels per day of water, allowing Eni to ship sales-quality crude oil through the trans-Alaska oil pipeline without further processing. Eni recently signed an interconnection agreement to use the Kuparuk Pipeline to get the oil to the trans-Alaska pipeline at Prudhoe Bay.

Eni said its facilities were designed and built to minimize environmental impact, using technologies like "zero flaring, pipe-in-pipe technology for hydrocarbon transportation, spill containment devices in all modules and low-emission turbine generators."

Eni is 100 percent owner of the Nikaitchuq unit.

QUICK DEVELOPMENT CYCLE

Eni brought Nikaitchuq online almost three years to the day after sanctioning the project.

The prospect dates to exploration work by the Denver-based independent Armstrong Oil and Gas in the late 1990s; Armstrong eventually partnered with Kerr-McGee on a drilling program.

Eni picked up the Nikaitchuq unit through acquisitions in 2005 and 2007.

In early 2007, the state agreed to more than double the unit by co-opting leases from the Tuvaaq unit to the west and un-unitized leases to the south. In the second half of the year, the state modified the royalty requirements on most of the leases at the expanded unit, setting up a structure where Eni pays lower royalties over the first 25 years of sustained production if oil prices drop below an inflation adjusted price of $42.64 per barrel.

Following those wins, Eni sanctioned a $1.45 billion development plan in February 2008.

At the time, Eni envisioned a 73-well program to bring the field online by late 2009, and estimated that the field contained 180 million barrels of recoverable reserves.

That summer, Eni became a producer in Alaska through its 30 percent stake in Oooguruk, a neighboring offshore unit to the west that Pioneer operates.

In early 2009, Eni eased off that hurried pace, setting a target of late 2010 for first oil.

HURRICANE FACTOR

While many in the oil patch blamed the delay on low commodity prices and a weak economy, public filings later revealed that a hurricane in the Gulf of Mexico caused Eni to miss the brief seasonal window for sealifting heavy equipment to the North Slope.

Over 2010, Eni consolidated its Alaska holdings. The company farmed out its North Tarn prospect to a group of independents led by Brooks Range Petroleum Corp., terminated its onshore Rock Flour unit tucked between the Prudhoe Bay and Kuparuk River fields, and relinquished its leases at the Maggiore prospect southwest of Prudhoe Bay.

Eni owns 151 leases in Alaska, covering some 130,742 acres of state land and water as well as federal Chukchi Sea leases owned alone and in partnership with Statoil.