|
BP in Alaska: Bidding around the edges BP attains strong lease position, waits on neighbors, drills to confirm Prudhoe discovery Frank Baker For Petroleum News
In 1964 the first state land at Prudhoe Bay was put up for auction. By that time, other oil companies were beginning to take more interest in BP’s lonely quest.
Disheartened by the failures in the Brooks Range, Sinclair opted out of the sale, which proved to be a fateful decision.
Short of dollars, BP decided it could not compete with American companies for expensive leases in the center of the structure. Instead, it gambled on the striking similarity of the Prudhoe Bay structure to its discovery in Iran — where the oil-bearing rocks had proved to be thicker and more prolific around the edges.
In some instances, BP did bid on what were considered prime tracts at the crest of the Prudhoe structure, but was outbid by Richfield.
When the bidding closed, BP had acquired 90,000 acres around the rim at an average price of just over $16 an acre — compared with the $93 an acre Richfield paid for leases in the central area.
BP acquired more acreage along the flanks in 1967.
The summer of 1966 saw little drilling activity by BP. Some were surprised when the company bid on some Sag Delta tracts in a 1967 state lease sale. BP acquired six offshore tracts northeast of Prudhoe Bay, in the vicinity of today’s Niakuk and Endicott fields.
But cash-strapped and discouraged by nine successive dry holes, the company decided to sit tight and see what its new neighbors, ARCO/Humble, would do at their new well, Prudhoe Bay State No. 1.
In March 1968 Richfield Oil and Atlantic Refining, which had merged three years earlier to become Atlantic Richfield (ARCO), announced a strike at Prudhoe Bay State No. 1 — at the center of the structure. The deposit was the largest ever found in North America.
Three months later ARCO drilled a second well — Sag River State 1 — seven miles southeast of Prudhoe Bay State 1, which confirmed that discovery. Ironically, the well was drilled with a Canadian rig that BP had relinquished.
BP turned down an offer from Atlantic Richfield to purchase all its Prudhoe Bay leases, and then quickly decided to resume drilling.
With 48 hours’ notice, a barge and drilling rig were acquired in southern Alaska. Along with 4,500 tons ancillary equipment, the rig was barged through the Bering Sea to Prudhoe Bay before encroaching ice made the Beaufort Sea impassable.
In the late 1960s, two other rigs were flown to Prudhoe Bay on Hercules C-130 transport planes and another lighter rig was also airlifted in.
Difficult conditions The BP airlift comprised five chartered C-130s, each costing about $250,000 a month, plus three Super Constellation aircraft. John Matyr, then general manager and vice president of BP Alaska, described the difficulty of these early logistics efforts: “I can recall those great Hercules thundering through the winter night and the great flurries of snow whirling up along the lights burning at the side of the ice runway,” he said.
“It was the most difficult operation that I’ve ever been associated with,” adds Matyr, a veteran of Kuwait, New Guinea, Trinidad and Libya oil fields, as well as the gold mines of southern India.
In a 1970 interview with BP’s corporate magazine BP Shield, truck driver Burn Roper vividly described the weather conditions as ground-based crews scrambled to deliver BP’s critically needed drilling equipment.
“We needed almost as much fuel to keep warm as to run the rigs,” noted Roper. “The temperatures were something fierce, running down to minus 65 degrees Fahrenheit. At this temperature steel was as brittle as candy; human flesh froze in 30 seconds. Engines had to be kept running round the clock — from fall to spring they never stopped.”
One inexperienced pilot who flew a light plane from Fairbanks was foolish enough to switch off his engine as he came to the end of his taxiing. It took three days to get it started again.
Roper drove a 20-ton transport truck in a convoy that in 1968 made the 11-day, 600-mile trip up the winter Arctic Ice Road from Fairbanks over the Brooks Range to the North Slope. (The road was sometimes referred to as the Hickel Highway, named after then-Alaska Gov. Walter J. Hickel, who spurred the road’s construction).
“We had a tractor with us to pull us over the ice ledges we met along the way,” Roper said. “These ice steps were more than two feet high. We had radios in our cabs, and though we were alone, we could talk to each other and to the convoy leader.”
The Hickel Highway followed old Native trails and much of the route was bulldozed by Boyd Brown, Tennessee Miller and others during the famous 1964 cat train, which transported seismic exploration equipment to the North Slope. No road was actually built — only a simple path cleared across the tundra. Other cat trains had made their way north in the mid-1950s in connection with the military Distant Early Warning system, or DEW line, west of Prudhoe Bay.
BP makes Prudhoe Bay confirmation Using a rig that had been barged from Kenai in late summer, drilling began Nov. 20, 1968, on BP’s Put River No. 1, on the banks of the Putuligayuk River, three miles from the Arctic coast and three miles south of ARCO’s initial discovery well. In an interview with Jack Roderick in the book Crude Dreams, released in 1997, BP geologist Geoff Larmanie noted that Put River No. 1 was designed to be located outside the edge of the gas and in the oil leg of the Prudhoe Bay structure.
“BP wanted to determine the thickness of the Prudhoe column at Put River and to then use this information to re-evaluate its seismic data,” Larmanie said. “As drilling continued throughout the winter, communications security was a problem. People at the well had to communicate with company officials, but without others listening in.
“Everyone was sharing these terrible radio frequencies. We had a very good radio man in London who knew the international system … frequencies, the VHF and rural problems, but we didn’t have FCC authority to use the frequencies. So, as we were getting closer to the target at Put River No. 1, we were sending information out in sealed bags — airlifted, hand-carried stuff.”
Larmanie noted that on one occasion messages were exchanged by two Welsh-speaking geologists, one on the rig and the other at Anchorage. “Welshmen Harvey Jones and Ron Walters conducted a conversation in their native language, transferring all the Put River information from the rig to Anchorage,” he said.
Finally, on March 13, 1969, BP made brief announcements in London and New York: “Oil had been discovered in porous sandstone below 8,000 feet,” with an oil-column thickness greater than that at Prudhoe Bay. It was a major extension of the Prudhoe Bay discovery, like the Sag River State No. 1 well.
The announcement was extremely significant. BP had acquired enough leases in preceding years to lay claim on about 60 percent of the entire Prudhoe Bay field.
After further drilling and analysis, BP announced six months later — in a Sept. 28 announcement — that an independent review of eight of its Prudhoe Bay wells indicated that nearly 5 billion barrels of recoverable oil lay under its leases. The total field was then estimated to contain about 9.6 billion barrels of recoverable oil and 26 trillion cubic feet of natural gas — a super-giant oil field of Middle East proportions.
With improved technology and additional investments, Prudhoe Bay’s recoverable oil reserve figure would later be revised to about 13 billion barrels.
| 