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ExxonMobil's Point Thomson field on the North Slope is expected start condensate production by May 1, with a startup deadline of mid-May, Corri Feige, director of Alaska's Division of Oil and Gas, told the Alaska House Resources Committee yesterday. Feige was presenting an overview of the current status of Alaska's oil and gas industry, and noted several significant activities. Feige said that Caelus Energy has completed the first of its exploration wells in Smith Bay and is now drilling the second well planned for this winter's exploration season. Repsol and Armstrong Oil & Gas have started the National Environmental Policy Act review for a proposed development in the Pikka unit, between the Kuparuk River and Alpine fields. Production from that development would likely come on line in five to seven years, Feige said. AEX, a subsidiary of Arctic Slope Regional Corp., is drilling its Placer No. 3 exploration well in the central North Slope to the south of Oooguruk. Great Bear Petroleum is conducting a further large 3-D seismic survey in its acreage south of Prudhoe Bay. the untapped potential of Alaska’s North Slope, famed for the giant Prudhoe Bay discovery, lies with an unconventional play called the HZM, located around 11,000 feet below the surface. However, there is a double whammy here as Tangiers’ neighbour, Great Bear, is also chasing a higher-lying, potentially prolific conventional ‘turbiditic’ play. Only with the advent of advanced 3D technology have explorers been able to discern potential game-changing conventional targets below the perma-frost. With a 60 per cent chance of success, hopes are high that Great Bear can hit a home run with one of its three wells scheduled between January and May. Depending on the success of Great Bear, it may or may not shoot 3D seismic to identify conventional targets before drilling a well that will test the conventional and unconventional plays. Combined, the seismic and initial well cost will be $40million. But given that Alaska runs a system of providing cash rebates on 85 per cent of anything invested on exploration, the net outlay probably comes out at closer to $12million, once you factor in the cost of finance, step in Prospex Oil and Gas a London listed aim minnow who can provide the answer with a £2.5 million cash injection for a 20% stake if local sources are correct. The success of Great Bear could be transformational for Prospex Oil and Gas – and this for just minimal investment. For a conventional discovery on the door-step is likely to revalue significantly its land package. It is paying an all-in $40 an acre, while deals in the immediate area point to property rising in value to $1,000-2,000 an acre if oil is found nearby. And Accumulate Energy, having drilled its Icewine no 1 well, at Franklin Bluffs on the Dalton Highway, is now preparing to start a seismic survey in its leases. It might not be a great time to be an oil company, but independents across Alaska are saying “the show must go on” through their exploration and development work this winter. One of the newest players on the North Slope, Australia-based junior 88 Energy Ltd. announced Feb. 29 that positive results from its first well Icewine No. 1 have led the company to start a two-dimensional seismic survey this month. 88 Energy plans to drill a second, horizontal exploration well, Icewine No. 2H, this year on its leases south of Prudhoe Bay, according to a company release. 88 Energy Managing Director Dave Wall said in a statement the results from Icewine No. 1 met and exceeded expectations. The well was spudded Oct. 15. “As a consequence of these continued good results, we have tailored our seismic acquisition to focus on mitigating risk for the next well,” Wall said. The company is focused on shale plays in the Icewine prospect. It is estimated to hold a mean unconventional resource of 492 million barrels, according to investor reports. 88 Energy and its minority partner Burgundy Xploration of Houston began acquiring leases on the central North Slope in November 2014. The partnership will hold more than 270,000 acres of state leases about 35 miles south of Prudhoe once its 2015 lease sale awards are final, 88 Energy states.Anchorage-based Great Bear Petroleum is also exploring shale prospects just north of Icewine. An existing gravel road off the Dalton Highway makes the area accessible for year-round work. The lease position is also bisected by the trans-Alaska Pipeline System, providing easy access to markets should Icewine be seen through to production. 88 and Burgundy are working under the joint venture Accumulate Energy. Wall said the 2-D seismic program will give a broader picture of the acreage and should identify any large conventional features that would be economic at lower oil prices. 88 Energy had first planned for a 3-D seismic program to follow drilling of Icewine No. 1. While Alaska North Slope crude is currently selling for just more than $30 per barrel, it is costing producers about $46 per barrel to extract and ship to market, according to the state Department of Revenue. The cost for Icewine No. 1 came in on budget at $16.1 million, according to 88 Energy, and was drilled by Kuukpik Drilling’s Rig 5. Overall, the budget for both wells and the seismic program is projected at $60 million to $75 million. The State of Alaska is expected to cover upwards of 75 percent of the exploration costs through its refundable tax credit incentive program, according to 88 Energy. To the north, Dallas-based Caelus Energy is digging into the remote Smith Bay prospect, which holds “true billion-barrel potential,” according to the company. Smith Bay is about 150 miles northwest of Prudhoe, far west of the developed areas of the Slope. Alaska Division of Oil and Gas Director Corri Feige said in a Feb. 24 House Resources Committee hearing that Caelus has shifted attention from its Nuna development this winter and is currently drilling the second of two exploration wells at Smith Bay from a grounded, shallow water ice pad. Caelus’ Nuna project is progressing on schedule to meet an October 2017 deadline for first oil agreed to in a royalty modification deal with the state, Feige said. At its adjacent producing Oooguruk Unit, development is continuing. “Caelus has done a lot of work recently to optimizing the frack and to optimize their recovery and increase production from those wells,” Feige said. All of Caelus’ work on the Slope is using fracking techniques. Oooguruk has produced about 23 million barrels since 2008. Arctic Slope Regional Corp.’s exploration subsidiary AEX also spudded the Placer No. 3 well in late January, Feige said. The Placer Unit just west of the large Kuparuk Field. Placer No. 3 will delineate a reservoir first explored with Placer No. 1 and No. 2 wells drilled by other companies in 2004, according to an ASRC release. Feige said the exploration work by a range of small and mid-sized independents, on top of continued infill drilling being done by the “big three” producers reveals the strength companies still see in Slope prospects. “I think fundamentally what this tells us is that the industry still views the resource endowment (on the Slope) and the environment of investing in Alaska as being a good place to be,” she said. To the large producers, Feige said BP continues to be “very aggressive” at expanding and maintaining production from Prudhoe Bay, while ConocoPhillips is in the midst of drilling eight new wells at its CD5 development this year. Production from the $1.1 billion CD5 development started ahead of schedule in October. ConocoPhillips spokeswoman Natalie Lowman said early production has met expectations, while the reservoir quality beneath part of the development exceeded expectations. Peak production from CD5 is estimated at 16,000 barrels per day. The $4 billion Point Thomson natural gas development led by ExxonMobil is also on schedule to meet its mid-May production deadline, Feige said. Natural gas liquids should begin flowing from the eastern Slope project to TAPS in early May, she said. BP is a minority owner in the large Point Thomson gas field, which is a lynchpin to the Alaska LNG Project. | ||||||||||||||
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