Biden Admin Decision to Approve Willow Dubbed a Sign of the Times

The Biden administration’s decision to approve the controversial Willow project on Alaska’s North Slope is a sign of the times – governments struggling to balance the dueling priorities of energy security and the journey to a cleaner future.

That’s what Rystad Energy Vice President Radhika Bansal said in a new market note sent to Rigzone this week, adding that a seamless transition requires policies that utilize a mix of all energy sources, “with ongoing efforts to decarbonize existing operations while accelerating investments for a cleaner and greener future”.

“The approval of the three-pad development by ConocoPhillips is viewed by some as a prudent balancing act at a time when energy security during the bridge years of the transition becomes paramount,” Bansal said.

“ConocoPhillips has had leasing rights in the region since the 1990s, which are extremely difficult to be overturned in a court of law, and the administration may use this as justification for approving the project,” the Rystad VP added.

Bansal said in the note that Willow’s estimated 600 million barrels of crude will help refill storage and meet domestic demand but highlighted that the asset is not going to start producing before 2028.

“The approval of the project also ensures the continued operation of the Trans-Alaska Pipeline System (TAPS), which requires regular supply of oil to run smoothly and efficiently,” Bansal said.

Rystad Energy estimates that the project will have a competitive breakeven oil price of less than $30 per barrel of Brent, Bansal revealed, adding that the project is expected to attract investments of $7.4 billion and has a net present value of almost $3 billion.

“The revenue generated from Willow will boost ConocoPhillips’ bottom line, but it will also benefit the state of Alaska by generating jobs and federal revenue,” Bansal said.  

“At full production capacity, the asset will constitute 10 percent of ConocoPhillips’ net crude oil production globally in 2030. Considering every ConocoPhillips project expected to start up between this year and the end of the decade, Willow is set to contribute a 55 percent share of cumulative volumes in 2030,” Bansal added.

In the note, the Rystad VP stated that Alaskan oil production has been declining since the 1980s after it peaked at more than two million barrels per day. By 2010, it was barely 600,000 barrels per day, Bansal said, adding that the company’s estimates show 2022 output fell to 430,000 barrels per day.

Bansal also highlighted in the note that the administration “tried to appease environmentalists and critics by negotiating with ConocoPhillips to relinquish oil rights to 68,000 acres of its existing leases in the National Petroleum Reserve, including about 60,000 acres in the Teshekpuk Lake Special Area”.

“They also announced the protection of almost 16 million acres of Alaskan land and water from any future oil and gas leasing. Even so, continued controversy and pushback is expected,” Bansal added.

Legal challenges are forthcoming, according to Bansal, which the Rystad VP said could delay or jeopardize the project’s future.

“Still, if the Biden administration remains fully committed to the project, crude production from Willow could be a major boost for U.S. supply, helping alleviate some of the strain on global markets as Western nations away from Russian energy volumes,” Bansal said.

On March 13, the U.S. Interior Department (DOI) announced that it had issued a record of decision (ROD) regarding the proposed Willow Master Development Plan in the National Petroleum Reserve-Alaska (NPR-A). The DOI said it is “substantially reducing the size of the project by denying two of the five drill sites proposed by ConocoPhillips”.

In a statement posted on its site on the same day, ConocoPhillips welcomed the DOI’s ROD on Willow. The company added that it continues to review the ROD and said it will advance internal approval processes towards a final investment decision.

In its statement, ConocoPhillips noted that the Willow project is estimated to produce 180,000 barrels of oil per day at its peak and projected to deliver between $8 billion to $17 billion in new revenue for the federal government, the state of Alaska and North Slope Borough communities. The company said Willow has the potential to create over 2,500 construction jobs and approximately 300 long-term jobs. 

To contact the author, email andreas.exarheas@rigzone.com

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