ConocoPhillips Receive Green Signal from Alaska Court On Oil Field As It Ponders Future Strategy on Chinese Shale

Ruling clears hurdle for project that will yield first drop of oil in December while US oil major presses ahead for shale gas in China.

ConocoPhillips (NYSE:COP) will press ahead with its oil field in Alaska after the US District Court there approved a key permit for the company to commence its projects.

The permit was granted by the US Army Corps of Engineers four years ago for the project codenamed CD-5, which is a $1.1 billion endeavor that will produce more than 15,000 barrels of oil per day. However, five residents, who live in a nearby village of Nuiqsut, challenged the project.

The residents of the village challenged the project after they expressed their concerns over the new infrastructure bridges and a connecting six-mile long road that would disturb subsistence farming in the Colville River delta streams. The US Army Corps of Engineer denied it then, only to reverse it later on after ConocoPhillips provided extensive assurances.

Then ruling has displeased the environmental law firm, Trustees for Alaska, representing the villager’s case but ConocoPhillips welcomed the ruling for which the project is nearing the completion with a peak of 700 workers, who had worked on this project for the past two winters.

Meanwhile, the US oil major says that it is still interested to work on shale in China despite calling its exit at the Sichuan Basin blocks last year. Poor oil prices and returns forced the company to pull out of the Neijiang-Dazu as well. In addition, the block was too deep and deemed too high risk to go for a further step.

The decision for ConocoPhillips, the latest oil major to pull out of the venture with shale oil major, Sinopec, will serve as a blow to the East Asian nation’s ambition to boost its shale gas output goal to 6.5 billion cubic meters of shale gas. Chevron ended its partnership with Sinopec for the block at Qiannan Basin of Guizhou province in April 2014, after three unsuccessful drilling attempts. Sichuan is still considered as the best bet, as its shale acreage is expected to produce 20 bcm/y of shale gas by 2020.

Shale oil producers have been expressing their interest in going beyond providing research and development of technology, signing PSCs and equipment manufacturing, but low oil prices provide little room for profits. Despite that, ConocoPhillips remains optimistic and say that the only way this can be looked at is through a third party venture capital. Some oil majors still hold the interest in Chinese shale and willing to incur small-term losses for long-term profits.

ConocoPhillips stock price ended the day at $63.68, down 0.30% the previous day.