Oil Companies Will Rev Up Prudhoe Effort : Energy: The six companies will try to arrest a production decline in the Alaska field. It will cost $1.1 billion.

Six major oil companies that own and operate the Prudhoe Bay oil field in Alaska said Tuesday that they will spend $1.1 billion to boost oil production and arrest a decline in output from the massive field that provides about 18% of the nation’s total production.

Los Angeles-based Atlantic Richfield Co. and BP America Inc., a unit of British Petroleum, will be the lead partners in a project that will boost production of crude and other liquids from the field by 100,000 barrels a day when it comes on line in 1995.

The project, which will increase the operators’ ability to handle natural gas that will be reinjected into oil reservoirs, will result in the recovery of an additional 330 million to 450 million barrels of oil and liquids over the life of the field. It has reserves of about 4.6 billion barrels of oil left.

“We think it will significantly increase reserves,” H. L. (Skip) Bilhartz, president of Arco Alaska Inc., said in an interview. “It is significant to the state of Alaska and to the nation.”

Although announcement of the project, which has been in planning stages for several years and follows a similar project that is near completion, coincided with the Middle East crisis, it was not spurred by events in the Persian Gulf or the subsequent rapid rise in crude prices, Arco spokesman Albert Greenstein said Tuesday.

But officials said the current crisis highlighted the nation’s need for such a project.

“At a time of American concern about long-term oil supplies, this project will make a welcome contribution and shows Alaska’s potential to add significant domestic reserves,” BP Chairman Robert Horton and Arco Chairman Lodwrick M. Cook said in a joint statement.

The project comes at a time when oil output from Alaska’s North Slope has been falling from its peak in 1988. Prudhoe Bay accounts for roughly 70% of the proven recoverable oil reserves on Alaska’s North Slope.

Production from all the fields on the North Slope has declined from 2.02 million barrels a day in 1988 to about 1.77 million barrels a day in the first five months of this year, the Department of Energy reported.

“What’s happening now is that they’re battling geology, and to do that, you’ve got to spend a lot of money,” said Daniel Yergin, president of Cambridge Energy Research Associates in Massachusetts.

To boost production, operators of the fields must expand their ability to handle the natural gas that accompanies oil pumped from the ground. As an oil field ages, more gas comes up, making production harder. With the proper equipment, gas can be reinjected into the oil reservoir, creating pressure that forces more oil out of the ground.

The proposed project is the second of two designed to do that. The first, a $470-million effort called Gas Handling Expansion 1, or GHX-1, should be completed by year-end. It will boost oil production at first by 75,000 barrels a day and eventually by 90,000, Bilhartz said. GHX-1 will add 400 million barrels of oil to Prudhoe Bay over the life of the reserves, he added.

This past summer, barges hauled huge compressors from their manufacturing sites in Oregon up to Alaska’s North Slope, where they will be installed.

The project announced Tuesday, called GHX-2, will require two separate barging operations, in the summers of 1993 and 1994. It will boost the field’s gas-handling ability to 7.5 billion cubic feet when completed.

“It would be a major step forward, there’s no doubt about that,” said Scott T. Jones, president of AUS Consultants Inc. in Philadelphia and a former Arco executive. “I don’t know if you could call it extending the life of the field, but you certainly will get more oil out of the ground.”

Since the Middle East crisis began, Arco and the other oil companies that operate the North Slope fields have announced temporary measures to boost oil production. A program of “well refracturing,” under which old oil wells are reworked, has the potential of adding another 50,000 barrels a day of liquid production, Greenstein said.

The new project promises to benefit the state of Alaska, which exacts hefty royalties and taxes on oil production. At oil prices of about $30 a barrel, the state could realize as much as $1 million a day from the 100,000 daily barrels of new production, said Edward Phillips, a petroleum economist with the state of Alaska. New jobs will also be created.

As part of the project, Arco and BP announced that several other issues had been resolved among the various owners of oil and gas interests in the Prudhoe Bay field. Details were not disclosed, but Bilhartz said: “It was a major step forward for the unit and will settle many of the disputes between us, such that we can in an easier fashion bring forward future developments.”

The principal owners of the Prudhoe Bay oil field are Arco, with roughly 22%; BP, with roughly 51%, and Exxon Corp., with 22%, as well as Phillips Petroleum Co., Mobil Corp. and Chevron Corp. BP and Arco operate the field.