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Independent audit confirms the commerciality of Mustang development
For Petroleum News
With an independent audit confirming its exploration results, Brooks Range Petroleum Corp. is detailing its plans to bring its Mustang project into production by 2014.
The operating arm of Kansas-based Alaska Venture Capital Group LLC is also deciding how much exploration work in can maintain this winter across its properties and is considering between three and nine penetrations across five North Slope units.
According to the global consulting firm DeGolyer and MacNaughton, the Mustang prospect contains proved (P1) gross reserves of 24.7 million barrels of recoverable oil. The firm also estimated the field contained 43.6 million barrels of proved and probable (P2) reserves and 51 million barrels of proved, probable and possible (P3) reserves.
“These estimates confirm commerciality and a favorable rate-of-return to proceed with development,” AVCG lead member Ken Thompson told Petroleum News Aug. 3.
The audit is the first publicly released third-party estimate of Mustang, a prospect in the Southern Miluveach unit, which is located just southwest of the Kuparuk River unit.
Brooks Range Petroleum plans to complete engineering on its standalone facilities this year, lay gravel this coming winter and start building the modular facilities in 2013. The company expects production will begin in the first half of 2014 and peak at 14,000 barrels per day in 2016. Brooks Range Petroleum is estimating a 20-year field life.
Brooks Range Petroleum is exploring and developing the region through a joint venture with the Nabors Industries subsidiary Ramshorn Investments Inc. Brooks Range Petroleum previously estimated it would take “a few hundred million dollars to develop Mustang” and said it needed additional partners to tackle all its North Slope prospects.
A quick turnaroundThe joint venture has drilled three penetrations at Mustang in recent years.
The joint venture drilled the North Tarn No. 1 in early 2011 to test targets in the Brookian formation and the deeper Kuparuk formation. Brooks Range Petroleum estimated at the time the Brookian reservoir contained some 35 million barrels of oil and the Kuparuk reservoir contained an additional 6 million barrels of oil, but said the Kuparuk presented a better bet for initial development because of the complex geology of the Brookian.
North Tarn No. 1 found oil, but well control challenges kept the company from testing the well at the time. The joint venture began a sidetrack, North Tarn No. 1-A, but suspended the well at the end of the winter drilling season. This year, Brooks Range Petroleum returned to complete the sidetrack and drill the Mustang No. 1 delineation well.
While the joint venture originally planned to drill as many as three Mustang wells this past winter, it learned what it wanted to learn after just one well and released its rig.
What the companies learned was the deeper Kuparuk sands at Mustang held more recoverable oil than they originally estimated. “The Kuparuk is good quality sands with excellent pressure and oil flow capability,” Thompson told Petroleum News in April.
At the time, the company announced a 40 million barrel oil discovery at Mustang, estimating the field could produce for 15 years and peak at 13,500 barrels per day.
And while the oil shows in the Brookian sands were of “lower permeability than anticipated,” Brooks Range Petroleum plans to test ideas for the formation during development. Those ideas include long horizontal wells completed with fracturing or recompleting depleted Kuparuk producing wells into the Brookian using horizontals.
Additionally, Brooks Range Petroleum wants to explore a potential Kuparuk formation extension to the northwest called Appaloosa that could add reserves and field life.
Exploration still a focusWith a successful development plan, Mustang would make Brooks Range Petroleum a producer after more than a decade as one of the most prolific explorers in Alaska.
And while Thompson estimated that some 80 percent of future capital would go toward developing proved oil reserves, the company still plans to remain an active explorer.
Brooks Range Petroleum currently operates five North Slope units — Southern Miluveach, Kachemach, Tofkat and Putu in the fairway between the Kuparuk River unit and the Colville River and Beechey Point in the Gwydyr Bay region north of the Prudhoe Bay unit. And it’s waiting for approval of a sixth, the proposed Telemark unit over leases on the eastern North Slope, in the area south of the Badami and Point Thomson units.
This coming winter, Brooks Range Petroleum plans to drill a delineation well and a sidetrack in the Tofkat unit, offsetting the discovery it made with the Tofkat No. 1 well.
The wells would test 3-D seismic anomalies in the Brookian formation, confirm the size of the previous discovery in the Kuparuk and test the deeper Jurassic by “offsetting two high flow rate Jurassic wells in ConocoPhillips’ Nanuq Field area,” Thompson said.
In early 2008, Brooks Range Petroleum drilled the Tofkat No. 1 well and two sidetracks east of Nuiqsut. The well collected 10 oil samples from four different sandstone reservoirs and found six feet of net pay in the Kuparuk formation, the deepest zone tested. The company also acquired 210 square miles of 3-D seismic over the prospect.
Brooks Range Petroleum is also planning an exploration well this winter into the Kuparuk formation at Beechey Point “in an area where we think there is a Midnight Sun field lookalike,” Thompson said, referring to the western Prudhoe Bay satellite.
Decisions pendingThe joint venture also plans to spend the coming months finalizing geology and seismic evaluations to assess between three and six potential exploration wells in the Putu, Kachemach and proposed Telemark units. “Decisions on proceeding — or not proceeding — with some or all of these wells will be made in the next few months and will be based on working interest owners’ technical and capital budgeting priorities,” Thompson said.
While six units would make Brooks Range Petroleum the most active operator on the North Slope — by comparison, the global giant BP operates “just” five North Slope units — Thompson believes the company can continue geoscience and engineering work on all six simultaneously and stagger its operations year by year to meet its work commitments.
“The state has allowed us to time various work over the next few years to manageable levels each year for development and exploration, although some exploration locations might be better technically with less chance of being dry holes if drilled in 2014 after seeing results from exploration wells in 2013,” Thompson said. “We plan to talk to the state about this as they are also exposing exploration risk dollars via their tax credits.”
But, Thompson added, “After further geosciences’ review and prioritizing the capital budget, working interest owners may also elect to not proceed with certain unit commitments, and if so, will drop units if that is deemed the best business decision.”
Additionally, the joint venture is evaluating what to do about the roughly 40,000 of its 161,000 gross acres not held by units. Some of those leases are set to expire this fall, and others would expire in subsequent years, if the companies don’t drill and form units.