Explorers 2014: NordAq is working on North Slope and in Cook Inlet

The tiny Alaska independent has drilled two wells since 2010 and is pursuing an ambitious North Slope program

Eric Lidji

For Petroleum News

NordAq Energy Inc. is one of the smallest exploration companies working in Alaska, but it has been diligently pursuing prospects in Cook Inlet and on the North Slope.

The Anchorage-based company arrived with a wave of independents in early 2010 by picking up state acreage at lease sales and acquiring Cook Inlet Region Inc. leases, but the principals of the company have been well known in the Alaska oil industry for years.

NordAq President Bob Warthen boasts of nearly 45 years of Cook Inlet experience, including a quarter century of senior management for Union Oil Company of California.

NordAq is currently pursuing the Shadura prospect in the Kenai National Wildlife Refuge, the Tiger Eye prospect in the Trading Bay region and a prospect in the Smith Bay region of the North Slope, but holds leases at several other prospects in both basins, including the Anakema prospect located just offshore of the Kenai Industrial Center.

An early discovery at Shadura

The prospect was west of the Swanson River field, on subsurface land owned by Cook Inlet Region Inc. The Alaska National Interest Lands Conservation Act created a mechanism for CIRI to allow access to lands within the refuge for resource development.

The onshore well primarily targeted natural gas objectives in the upper and middle Tyonek formation between 11,000 and 14,500 feet, and included a secondary target in the shallower Beluga formation between 6,000 and 11,000 feet, according to state filings.

Toward the end of the year, rumors swirled about a potentially large discovery. NordAq announced a “significant natural gas discovery” in November 2011 and later suggested that the prospect could produce up to 50 million cubic feet per day over 30 years.

In April 2012, though, Warthen tempered enthusiasm for the Shadura discovery, saying that the 50 million cubic feet per day figure measured the “facility design volume.” The actual production rate could be a lot less, and would depend on the quantity of gas NordAq could sell into the local market, but he declined to offer specific discovery size.

To assess the discovery, NordAq began permitting a flow test and an appraisal well in early 2012, By April 2012, NordAq was proposing a six-well development program.

Asked at the time whether the company had sanctioned Shadura, Warthen said, “We wouldn’t be here if it’s not a go. Going through an EIS process is not inexpensive.” He also said the appraisal well could take as long as two years to come to fruition because the directional well would extend more than 16,000 feet, requiring a fairly large rig.

In November 2012, NordAq began permitting a 49-square mile onshore 3-D seismic program around the Shadura prospect. The survey used a cable-free recording system.

A brief EIS debate

The draft EIS presented a two-phased development plan. NordAq said it planned to build a 4.3-mile gravel access road and a “minimal” pad to support one well in June 2013.

If the results were “unfavorable,” NordAq would remove the infrastructure and restore the area. If the results were good, though, NordAq would expand the pad to 500 feet by 550 feet and drill five additional gas wells, an industrial water well and a waste well. The goal would be to bring the field into production by June 2014, selling the gas into the pipeline connecting the Tyonek A platform to the Kenai liquefied natural gas plant.

That development scenario accounts, at least in part, for NordAq publically supporting plans to resume LNG exports from the mothballed ConocoPhillips facility in Nikiski.

“In the absence of an LNG option natural gas prices will continue to remain artificially low and create a disincentive for exploration and development,” Warthen wrote to the Regulatory Commission of Alaska in late 2013. If third parties supplied the plant to a greater degree, Warthen said, NordAq “believes that an export renewal should not be the singular burden of one operator to support. All companies with surplus gas reserves should be considered as candidates for providing gas to manufacture and export LNG.”

The 538-page final EIS proposed five alternatives for development, including the one NordAq preferred: a 4.3-mile access road from the north and buried pipelines and fiber optic cables.

The EIS also included two options to access that prospect from the south or the east, respectively, out of the Hilcorp-operated Swanson River unit. According to NordAq, either of these options would have made the project economically or logistically unfeasible and would therefore violate the ANILCA provision allowing development.

While acknowledging that the alternatives were “not ideal from NordAq’s perspective, the (U.S. Fish and Wildlife Service) believes that both alternatives remain feasible.”

By July 2013, though, the agency had given NordAq its preferred development scheme.

Now, NordAq plans to drill a well in a different part of the prospect this fall to determine whether to pursue development, according to NordAq Land Manager Chick Underwood.

“It’ll really hinge on this second well,” Underwood told Petroleum News in May 2014.

Environmental protections seasonally restrict certain activities in the Kenai National Wildlife Refuge, which means construction of a gravel road cannot begin until mid-July and drilling is unlikely to begin until mid-September, according to the company.

Shadura No. 2 will require a small drilling pad that would either be expanded for future development or removed and remediated if the well results prohibit development.

Tiger Eye on the west side

A proposed 12,000-foot Tiger Eye North No. 1 well would have targeted the Tyonek and Hemlock formations in an area about 1.8 miles southwest of the Trading Bay facilities.

NordAq expanded the program in May 2012. The revised program envisioned drilling the 11,500-foot Tiger Eye Central No. 1 in August 2012 and the 10,175-foot Tiger Eye Central No. 2 in September 2012, and a shooting 3-D seismic in the area in early 2013.

In July 2012, NordAq asked the state to form the Tiger Eye unit over two leases covering some 8,480 acres. The unit application proposed drilling the Tiger Eye Central No. 1 in the second quarter of 2013 and the Tiger Eye North No. 1 in the second quarter of 2014.

Without unitization, the leases were set to expire at the end of September 2012.

In a revised application in August, NordAq proposed drilling the two wells in 2012 and 2013, respectively, but kept the proposed 3-D seismic campaign for early 2013. The company intended to drill the first well in September, but faced “severe weather” delays.

NordAq also faced a challenge from Apache Alaska Corp., which asked the state to include three of its adjacent leases into the unit, saying they shared a reservoir.

The Alaska Department of Natural Resources approved a 7,680-acre unit in October 2012, and required NordAq to drill an initial well at the unit by the end of the year.

The state rejected the request from Apache, saying that the information Apache had provided to justify its claim did “not conclusively prove that the potential hydrocarbon accumulation” extended onto its leases, which meant there was “no evidence that Apache has an interest in the potential hydrocarbon accumulation to be included in the unit.”

Shortly after getting the unit, NordAq used Nabors Alaska Drilling Rig 106AC to drill the Tiger Eye Central No. 1 well, targeting the Tyonek and Hemlock formations.

In early 2013, NordAq amended its plan of operations at the Tiger Eye unit to include additional exploration and development activities. The changes envisioned expanding the TEC-1 pad to accommodate a 60-man camp and production facilities, constructing the TEC-2 pad, connecting the two pads by road and conducting exploration activities.

The plan called for drilling up to eight 4,000-foot wells on the TEC-1 pad before expanding it, and potentially bringing the pad into production by October 2013. But the program has proceeded more slowly and a development decision remains unmade.

Smith Bay work next year

NordAq picked up 11 tracts covering 58,880 acres of Smith Bay off the coast of the National Petroleum Reserve-Alaska in a December 2011 lease sale for some $1.3 million, and grabbed additional onshore and offshore acreage in November 2012 and 2013 sales.

The Smith Bay area is highly prospective for oil, but far from existing infrastructure.

By July 2013, NordAq had applied for an oil discharge prevention and contingency from the Alaska Department of Environmental Conservation, a key component for exploration.

NordAq proposed drilling as many as eight exploration wells on its Smith Bay area leases during the winters of 2013-14 and 2014-15. The wells would be divided between coastal waters and onshore sections of the northwest planning area of the NPR-A.

The proposal included 14 potential well locations - 10 Tulimaniq wells in Smith Bay and four NPR-A wells: Aklaq Nos. 2A and 6A, Aklaqyaaq No. 1 and Amaguq No. 2A.

The program would follow recent exploration by the Talisman-subsidiary FEX.

In 2007, the Canadian company drilled three nearby wells: the Amaguq No. 2, the Aklaqyaaq No. 1 and the Aklaq No. 6. FEX plugged and abandoned the Amaguq No. 2 well, saying it was “subcommercial given current infrastructure,” but suspended the Aklaqyaaq No. 1 and the Aklaq No. 6 wells and offered encouraging early estimates.

Specifically, FEX said that “initial estimate of contingent resources present” at Aklaqyaaq No. 1 and Aklaq No. 6 was “300-400 million barrels” net to FEX. The company held an 80 percent working interest in the relevant leases at the time.

While FEX planned to return to the region the following year, it ultimately cancelled those plans when federal agencies slowed the schedule of lease sales in the NPR-A.

Like the FEX program, the NordAq program would have to negotiate the rigors an isolated area. The Smith Bay wells would be 149-157 miles from Drill Site 2P and 68-77 miles from Barrow and the NPR-A wells would be even farther from existing fields.

NordAq had originally envisioned drilling in the Smith Bay region as soon as March 2014, but the program is currently scheduled to begin in the winter of 2014-15.