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July 2007

Vol. 12, No. 27 Week of July 08, 2007

Eni applies to roll Tuvaaq, other acreage, into Nikaitchuq unit

Move would more than double size of offshore North Slope unit, from some 12,968 to 33,869 acres; two wells just drilled from Oliktok Point, one may be re-entered, one used as injector

Kristen Nelson

Petroleum News

As it moves toward a possible end-of-year development decision at its Nikaitchuq unit, Eni Petroleum has applied to expand the unit by merging the adjacent Tuvaaq unit and additional acreage to the south.

The Nikaitchuq unit, offshore Alaska’s North Slope, is currently some 12,968 acres and would be expanded to approximately 33,869 acres according to an expansion application Eni has filed with the State of Alaska.

The Tuvaaq unit, adjacent to Nikaitchuq on the west, would become part of Nikaitchuq, along with three leases on the southern edge of Nikaitchuq: segment 2 of ADL 355024, between Tuvaaq and Nikaitchuq on the southern edge of the units; and ADL 390615 and ADL 390616 on the southeastern edge of the existing Nikaitchuq unit.

Nikaitchuq and Tuvaaq are on state acreage in the shallow waters of Harrison Bay north of the Kuparuk River and Milne Point units.

Eni requested the expansion in mid-May; the Division of Oil and Gas found the application complete and public-noticed it July 1.

Eni is 100 percent working interest owner in Nikaitchuq; it also has 100 percent working interest in the leases proposed to be added to Nikaitchuq.

Kerr Mc-Gee Oil and Gas Corp. and Armstrong Alaska formed the units; Eni acquired Armstrong’s interests in 2005.

When Eni announced its acquisition of Kerr-McGee’s 70 percent interest in Nikaitchuq in April the company said it was evaluating plans “for a phased development … with the target of sanctioning the project by year end, and first oil to flow by the end of 2009.”

Fewer wells now planned

When Kerr-McGee and Armstrong proposed a development plan for the area in early 2005 they said initial production would come from 20 wells to be drilled from an onshore pad at Oliktok Point with the majority of wells drilled from as many as three offshore gravel islands — with up to 50 wells per island — inside the barrier islands in the vicinity of Spy Island.

Eni said earlier this year that the completed project would have about 80 wells, 32 of which would be drilled from onshore and the remaining from a single offshore artificial island.

Eni said it and Kerr-McGee (the previous Nikaitchuq unit operator) have provided geological, geophysical, engineering and well data, along with interpretation of the data supporting the application.

Eni said the data establishes that “hydrocarbon potential exists throughout the area sought to be included in the expanded unit.” The information, presented to the state in a technical paper, is confidential.

“We acknowledge that hydrocarbon potential and the presence of hydrocarbons extend beyond the southern and eastern boundary sought in the application,” Eni told the state. “We have asked the owners of such adjoining property to join with us in the expansion of the Nikaitchuq unit to maximize the recovery of hydrocarbons. We have not received an affirmative reply,” the company said.

Two wells drilled this winter season; seismic experiment

Six wells were drilled by Kerr-McGee beginning in 2004. The Nikaitchuq No. 1 which “proved potential in both the Sag River and Schrader Bluff” formations, with a Sag River test of 960 barrels per day of 38 degree API oil; the Nikaitchuq No. 2 was not tested.

In 2005 the Nikaitchuq No. 3 was drilled with a 3,000-foot horizontal section and an additional flow test of the Sag B reservoir was done. The Nikaitchuq No. 4 used a 3,000-foot horizontal section to test the Schrader Bluff OA sand, with rates up to 1,200 bpd. The Tuvaaq exploration well was drilled to test continuity of the Schrader Bluff formation. The Kigun exploration well was drilled to further investigate the Schrader Bluff intervals.

Two additional Schrader Bluff wells were drilled in the 2006-07 winter season: Oliktok Point I-1 and Oliktok Point I-2.

Eni said the first well, the I-1, was a pilot hole drilled from Oliktok Point to a bottom hole location in section 33, T14N, R9E, UM, with a total measured depth of 8,990 feet and a TVD of 3,912 feet. Eni said the well has been temporarily abandoned and is being evaluated for re-entry to drill an extended horizontal section and incorporate it as an injection well in Eni’s initial plan of development — a plan the company hopes to submit to its management for project sanction by the end of this year.

The second well, a pilot hole and horizontal segment also drilled from Oliktok Point, was to a bottom hole location in section 31, T14N, R9E, UM, with the horizontal segment reaching 12,711 feet MD and 9,055 feet TVD. Eni said a production test was conducted on this well which has been temporarily abandoned and is being evaluated for incorporation as an injection well in Eni’s initial plan of development.

Beginning in April, Eni said, it conducted an on-ice seismic experiment on State of Alaska offshore oil and gas leases in the vicinity of Nikaitchuq with Shell Offshore at a cost of several million dollars. Results of the experiment “may result in substantial benefit to the Nikaitchuq unit and other State of Alaska offshore leases in shallow waters by allowing parties to acquire seismic data on such leases during the winter season in a manner that should have greater stakeholder acceptance,” Eni said.

Development, further exploration plans

Eni said that further evaluation of the entire unit area would follow “in reasonable steps,” with the timeframe and activities to be “determined by results.”

A plan of development is expected to be presented to Eni management prior to the end of the year, and if the plan is approved, Eni said it plans to approach the state soon thereafter for approval of the plan of development and establishment of “one or more” participating areas.

“The results of the drilling of the initial unit wells will provide information necessary to evaluate potential development of other areas of the unit,” Eni said.

Results of the on-ice seismic experiment will be used to develop a plan by July 2008 for potential 3-D seismic acquisition over parts of the expanded Nikaitchuq unit.

By September 2010, approximately 74 square miles of 3-D seismic would be acquired.

“Improvements in drilling technology over the next few years will be closely monitored to determine if additional areas can be reached for development from then existing facilities.”

The plan included in the expansion proposal is for a five-year period, and Eni said it would evaluate the seismic to be acquired by 2010 together with prior seismic and drilling information to develop future exploration plans for the unit area by October 2011.

Kerr-McGee talked expansion last year

Eni acquired Kerr-McGee’s 70 percent interest at Nikaitchuq earlier this year, after Kerr-McGee was acquired by Anadarko Petroleum in 2006.

Kerr-McGee said in 2005 that results from the Tuvaaq well proved the existence of the Schrader Bluff formation three miles to the west of Nikaitchuq. Kerr-McGee was preparing to apply for Nikaitchuq expansion last year, that company said in a May 2006 letter to adjacent leaseholders proposing that in addition to the Tuvaaq unit, section 2 of ADL 355024 and ADL 390615 and ADL 390616 would be included in the expanded unit, as well as a part of ADL 355021 “limited in depth from the stratigraphic equivalent of 100 feet below 7,426 feet TVD (total vertical depth) as drilled in the Conoco NW Milne No. 1 well (API No. 50-029-22231) to the stratigraphic equivalent of 100 feet below 9,507 feet TVD as drilled in the Nikaitchuq No. 2 well (API No. 50-629-23199-00). The specific aerial extent has not yet been determined but it is expected to exclude lands currently in the Milne Point Unit,” Kerr-McGee said.

“Depending upon your response and the response of others, there could be other adjacent lands to the south of those described above included in the application,” Kerr-McGee said, inviting participation in the expansion for that portion of sections 27 and 34 of township 14 north, range 9 east, Umiat Meridian which is west of the Milne Point unit.






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