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The Explorers 2008: Chevron continues winter exploration at White Hills
Kristen Nelson Petroleum News
Chevron plugged and abandoned its three North Slope Alaska White Hills exploration wells at the end of last winter and is preparing to continue exploration this winter at the prospect in the foothills of the Brooks Range west of the Dalton Highway.
Smilodon 9-4-9 (numbers refer to section, township and range, all Umiat Meridian), plugged and abandoned March 22, was a slightly deviated hole with a true vertical depth of 4,959 feet and a measured depth of 5,058 feet; Mastodon 6-3-9, a vertical hole with a depth of 4,845 feet, was plugged and abandoned March 27; and Panthera 28-6-9, plugged and abandoned April 11, was a vertical hole with a depth of 2,020 feet.
The wells were drilled with Nabors 106E, a new North Slope rig that Chevron first used to drill at Happy Valley on the Kenai Peninsula in mid-September 2007.
Chevron, the White Hills operator, has a 70 percent interest in the acreage, which covers some 770 square miles 25 miles southwest of Prudhoe Bay. Total E&P USA Inc. acquired a 30 percent working interest from Chevron earlier this year. Chevron acquired the White Hills tracts in state oil and gas lease sales in 2001 and 2006, and has said it plans to drill as many as eight wells in a proposed two-year program.
Chevron told Petroleum News in a September e-mail that it was not making results from the exploration wells public, but did say it would have drilled more than three wells last winter if it could have.
It plans to drill two of the remaining wells this winter — depending on the weather.
When it was permitting the White Hills locations in 2007 the company told regulators it planned to drill up to six wells in its first exploration drilling season, with the potential for additional wells in subsequent years.
The exploration drilling program could be expanded to a third year, the company said, depending on previous drilling.
Chevron has been an oil and gas explorer and producer in Alaska for decades, but its exploration drilling at White Hills in 2007 marked the first time the company — or Union Oil Company of California, which Chevron acquired in 2005 — has explored on the North Slope since the early 1990s.
Exploration target not named The company was not willing to talk about the exploration target at White Hills.
Former Alaska Division of Oil and Gas Director Mark Myers, now head of the U.S. Geological Service, told Petroleum News in 2006 that White Hills is close to the 1966 Susie well that Richfield drilled just before Prudhoe Bay was discovered. The Susie had oil shows and Myers said while the well was unsuccessful, “there is still significant interest in that area for oil.” Myers said targets in the White Hills prospect would include Cretaceous sands, including the Kuparuk River formation.
Division of Oil and Gas geologist Paul Decker told Petroleum News in 2006 that Unocal’s 1994 Amethyst well and BP’s 1991 Malguk well — both on Chevron’s White Hills acreage — penetrated thick Upper Cretaceous deepwater turbidite sands with good oil and gas shows. Decker said Phillips Petroleum’s 2002 Heavenly 1 well just west of White Hills had the same Cretaceous interval and that the same sands may extend within the Chevron acreage.
2009 won’t double Chevron’s Alaska investment for 2008 doubled that for 2007.
The company said in September that details for the 2009 capital plan were still being worked out and the plan is expected to be in line with 2008 levels. This is still a high investment rate by historic standards, the company said.
Two big variables in the spending rate for 2009 will depend on the outcome of the White Hills exploration drilling and the potential resolution of the Point Thomson dispute with the state.
“Early resolution will allow for significant capital” investment at Point Thomson in 2009-14, the company said.
Chevron noted that its Alaska opportunities must compete for exploration capital with the company’s opportunities worldwide. “Alaska is one of many areas that must show compelling prospects with attractive economics to gain funding.”
Alaska’s Clear and Equitable Share, or ACES — the production tax changes enacted in late 2007 — had no effect on White Hills, the company said, as the commitment to that project had already been made when ACES passed.
“ACES, when compared to the old ELF (Economic Limit Factor) system, will be a slight positive in the Cook Inlet because of the available tax credits,” Chevron said. “Longer term, it could have a detrimental effect on North Slope exploration on state land because, despite the tax credits available, there is an extremely high tax rate on successful projects, which may degrade the overall pre-drill economics of the prospect to the point that it could fail to attract capital.”
Not endorsing gas project Chevron is not currently endorsing either gas pipeline project. “We intend to commit our gas to any sound project with reasonable terms during the open season process and we need equity ownership in the pipeline commensurate with our shipping commitments,” the company said. Chevron said it “appears that there is too little technically proven gas available to fill an open season for either of the pipeline designs under consideration.” The company said it continues “to believe that for any open season to be successful, the Point Thomson gas needs to be part of the gas available.” Chevron was one of the major leaseholders in the Point Thomson unit. The state terminated the unit and revoked the leases earlier in the year; both decisions are being litigated. Chevron said it hopes “the state will enter discussions with the current owners to resolve the current dispute at PTU, as this is the only way that timely development of that resource will occur.”
On another gas pipeline issue, the state’s proposal that a line be built north from Cook Inlet to the Interior to provide natural gas to North Pole and Fairbanks and to spur gas exploration in Cook Inlet, Chevron said it does not think Interior markets are sufficient to justify Cook Inlet exploration.
“There are currently large utility market openings in the Cook Inlet that are unmet,” the company said. Since there is also the possibility of selling gas to industrial users, Chevron said it does not believe “that a limited market in a remote location will spur exploration.”
Cook Inlet development drilling Chevron has production from working interest ownership on the North Slope; its operated production is in the Cook Inlet basin in Southcentral Alaska, both onshore and offshore.
Chevron’s 2008 development drilling in the Cook Inlet basin included two wells at the Anna platform; two wells at the ConocoPhillips Alaska-operated Beluga River field; three wells at the Marathon Oil-operated Ninilchik field; two wells at the Grayling gas sands; one new well at the Swanson River unit; and completion and stimulation work at Happy Valley.
The company said that it is still finalizing its 2009 development drilling plans, but “will have a similar scope of work for 2009 as compared to 2008.”
Chevron drilled two exploitation wells at Happy Valley on the Kenai Peninsula in 2007, only one of which was completed. The company said the “initial zones in that well were disappointing. We plan to go back yet this year for additional testing and stimulation work.”
The company also planned the first new well the company has drilled on the west side of Cook Inlet in a number of years, at Stump Lake. That well, to be drilled with a rig drilling at Beluga, is still in the works, Chevron told Petroleum News in September.
Cook Inlet exploration
A possible Jurassic test well has been on Chevron’s drawing board — a test of deeper structures below current Cook Inlet production which is from the shallower Tertiary. A well into the Jurassic did have short-term production, the company said.
The Jurassic test is still in the works and could be on the company’s 2009 drilling schedule, but Chevron said it is “still trying to work through a number of operational and commercial issues associated with the project.”
The company said in 2006 that it was considering drilling deep in Cook Inlet to test the pre-Tertiary Jurassic. The test was planned for the McArthur River field.
The deepest vertical depth of a Cook Inlet basin well is some 12,000 feet and Commissioner Dan Seamount of the Alaska Oil and Gas Conservation Commission has said companies will have to drill another 5,000 feet below known reservoirs to test the deeper sands.
Seamount told Alaska legislators in 2005 that there has been relatively little exploration drilling in Cook Inlet compared with other U.S. oil regions. He said with potential deeper undiscovered oil existing platforms could play a role in exploration. The U.S. Geological Survey has estimated that only 4 percent of the oil theoretically generated from Cook Inlet source rock has been identified. Referring to existing platforms, Seamount told legislators, “There’s still a good chance that a lot of that 96 percent is still under the drill bit.” He said there are many known, untested Tertiary prospects assessable from the platforms and said fault blocks, some of which lie right under the platforms, form fault trays that could contain oil.
“We could explore untested fault blocks and now, with new technologies and extended reach drilling, there are a lot of other identified prospects within reach,” Seamount said.
Shallow gas target deferred Chevron had planned to target shallow gas from the Anna platform in 2008, following oil drilling from the platform. The Anna well was the only “true exploration” well in the company’s 2008 Cook Inlet plans.
“Significant delays in the two oil wells at Anna caused that well to be deferred to a future year,” the company said. “This decision was made so that we have time to get down to the Grayling gas sands and complete other gas well drilling that will have more immediate impact for meeting needs this winter.”
Chevron said in September it was nearly complete on the second oil development well at Anna. “The drilling on both wells has been difficult, and we are considerably behind our original schedule,” the company said. Results from the first well are disappointing, with only “small volumes of oil production from the well.”
Chevron is continuing to work on various platform upgrade projects in Cook Inlet. The company said much of the work is routine or in preparation for future drilling programs.
At Nikolaevsk, a gas prospect, on the Kenai Peninsula, Chevron said it continues “to look at ways to commercialize this accumulation and we are in discussions with other potential partners at this time.”
The company has added natural gas storage capacity at its Pretty Creek facility. “This addition will allow for additional volumes but will not increase peak deliverability.”
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