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NEWS BULLETIN

May 07, 2001 --- Vol. 7, No. 53May 2001

Update on new Slugger exploration unit

As reported in a May 4 news bulletin, the Slugger exploration unit south of Point Thomson has been approved by the state Division of Oil and Gas. The state and unit operator BP Exploration (Alaska) Inc. and BP’s partners Chevron U.S.A. Inc. and Phillips Alaska Inc. had been in disagreement on how much drilling would be required for approval of the unit. According to state officials the final agreement for the unit was a blend of the two proposals.

The approved plan requires two wells to be drilled within a three-year period and includes an option to extend the plan to four years.

According to the Slugger exploration unit agreement, the working interest owners are currently reprocessing and interpreting “a portion of the existing W. Thomson 3-D seismic survey” covering the Slugger unit area “in order to mature the Slugger unit to a drillable prospect.”

On or before June 15, the working interest owners have to “present their consensus interpretation” of the seismic to the state and commit to drill the initial exploration well, the Slugger #1. Failure to commit to drill will result in a termination of the unit effective midnight June 15.

The plan requires the working interest owners to drill through the Kemik interval and complete, suspend or abandon the well by May 15, 2003. Failure to do so will result in unit termination and a charge of $430,000.

State officials told PNA that the reason for the charge was that 45,184 acres of the 79,508 acres in the Slugger exploration unit would have expired this past March if the unit had not been formed. Some of the lapsed leases would have been included in the state’s Oct. 24 North Slope Areawide oil and gas lease sale.

If the working interest owners decide not to drill a second well they have to notify the state by June 15, 2003. Failure to commit to drill Slugger #2 will result in unit termination.

If Slugger #2 is not drilled by May 15, 2004, the working interest owners have to pay a delayed drilling charge of $400,000. Phillips was not agreeable to this charge, but BP and Chevron were willing to pay the entire amount.

If the working interest owners fail to drill Slugger #2 by May 15, 2005, they have to pay the state an additional $400,000.

Slugger #2 can be sidetracked from the initial wellbore as long as the sidetrack is at least 1,500 feet.

See the complete story on this unit in the next edition of Petroleum News Alaska.

Call for bids opens for Central Mackenzie Valley

Canada’s Minister of Indian Affairs and Northern Development is inviting bids on six parcels in the Central Mackenzie Valley. The call for bids opened May 5 and closes at noon on Sept. 17.

Bid selection is based on the total amount of money that the bidder proposes to spend doing exploratory work on the parcel during period one of the exploration license term. The term consists of two consecutive four-year periods.

Twenty-five percent of the bid amount has to be submitted with the bid.

The drilling of a well during period one qualifies the license holder to retain the license for period two, whether or not the total amount of the bid has been spent. However, any excess bid deposit will be forfeit.

This year for the first time a provision for a drilling deposit is included in the terms and conditions. A drilling deposit may be submitted at the end of the first period to obtain one-year period of grace to commence the required well. The deposit is refundable when the well is drilled.

The Northern Oil and Gas Directorate, which issued the call for bids, said the provision for a drilling deposit “recognizes limitations of rig availability and unpredictable operating windows in the North.”

Further information can be obtained by calling (819) 97-0877.

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