The Explorers 2009: Northern Alaska & Arctic offshore

Alan Bailey

Petroleum News Senior Staff Writer

In 1968 the discovery of the giant Prudhoe Bay field, the first field to be discovered on Alaska’s North Slope and among the 20 largest oil fields ever discovered worldwide, triggered a northern Alaska oil industry that now includes 19 producing oil fields, all feeding oil into the trans-Alaska oil pipeline for transportation to the Valdez Marine Terminal 800 miles to the south.

In fact, the totality of northern Alaska consists of five distinct geologic regions: the Brooks Range, the Brooks Range foothills (also known as the Arctic foothills), the North Slope (also known as the Arctic coastal plain), the Beaufort Sea and the Chukchi Sea. The central North Slope and the nearshore area of the Beaufort Sea contain all of the current operational oil fields in northern Alaska. The western North Slope includes part of the National Petroleum Reserve-Alaska.

NPR-A extends from the shoreline south across the western coastal plain and Brooks Range foothills, into the north side of the Brooks Range. The eastern North Slope includes the 1002 area of the Arctic National Wildlife Refuge, the area that has long been the subject of controversy regarding whether it should be opened for oil and gas exploration. ANWR extends south into the Brooks Range, but only the 1002 area is considered prospective for oil and gas.

The Brooks Range consists of east-west-trending mountain groups that reach heights in excess of 6,000 feet. There is little to no oil or gas potential in much of the Brooks Range proper, although rocks exposed at the surface provide valuable insights into many of the petroleum source rocks and reservoir units that occur in the subsurface to the north.

The folded and thrust faulted zone that marks the northern front of the Brooks Range runs generally eastward from the shores of the Chukchi Sea north of Cape Lisburne to a point near the trans-Alaska oil pipeline south of Prudhoe Bay, before turning northeast through the northern part of ANWR.

The Brooks Range foothills between the Brooks Range front and the North Slope consists of a series of rolling hills, mesas and east-west trending ridges with elevations from 900 to 1,500 feet. The rocks exposed in the foothills are younger and less deformed than those in the Brooks Range to the south.

Continental shelf

The continental shelf of northern Alaska extends north beneath the shallow Beaufort Sea for about 50 miles to a series of geologic faults that mark the edge of the Arctic Ocean continental slope. The geology of the continental shelf forms an extension of the onshore geology of the region — there are two operational oil fields in the Beaufort Sea, the Northstar and Endicott fields, both geologically related to the onshore fields and both connected into the North Slope oil infrastructure.

The Chukchi Sea extends over a vast offshore region, west of the North Slope and Brooks Range foothills. With huge geologic structures that correlate with the hydrocarbon-rich geology on the mainland of northern Alaska, the rocks under the Chukchi Sea contain all of the necessary ingredients for a world-class oil and gas province. Limited exploration in the 1990s yielded a major gas discovery that still awaits development. It’s even possible that there’s a Prudhoe Bay-scale oil field in the area.

And across this whole vast region of northern Alaska, the petroleum system consists essentially of three major rock sequences: The oldest and generally deepest of the sequences, the Ellesmerian, hosts fields such as Prudhoe Bay, Endicott and Lisburne. The Beaufortian sequence hosts the Kuparuk and Alpine fields. The Brookian, the youngest and generally shallowest sequence, hosts fields such as Badami and Tarn. All of the operational fields are aligned along a major geologic structure called the Barrow arch.

Central North Slope and nearshore Beaufort Sea

Over the last two decades exploration on the North Slope has shifted away from prospecting for fields akin to Prudhoe Bay in size and configuration. This change has resulted not only from the fact that very large oil traps of that type have been virtually exhausted in the onshore and nearshore areas, but also because better seismic data are available now for defining a large number of smaller, subtler traps.

In general terms, people widely recognize the petroleum systems of northern Alaska as hydrocarbon-rich but reservoir-poor. So, with an abundance of excellent source rocks and a relative shortage of reservoir-quality rock formations, any isolated stratigraphic trap, a hydrocarbon trap formed by the juxtaposition of reservoir and seal rocks in the rock strata, stands a good chance of containing oil or gas. Recent exploration has exploited the newfound capabilities of high-end 3-D seismic techniques to find these stratigraphic traps.

Moving west

To the west of Prudhoe Bay the 1994 discovery by ConocoPhillips’ predecessor, ARCO, and Anadarko Petroleum of unexpectedly prolific sands at Alpine opened the door to extending a new Beaufortian play beyond the Prudhoe-Kuparuk infrastructure. Perched on the border between state lands and NPR-A, Alpine drove the decision to reopen federal acreage of the western North Slope to exploration.

A series of wells drilled by ConocoPhillips and Anadarko in the northeastern corner of NPR-A since the renewal of leasing there in 1999 have tested Alpine-equivalent prospects and have yielded discoveries of light oil, condensate and gas in stratigraphic traps overlooked before the advent of 3-D seismic imaging.

In January 2008 ConocoPhillips and Anadarko formed the Mooses Tooth unit, with ConocoPhillips as operator, in a move that protected the companies’ NPR-A lease positions in an area by then known to contain five distinct oil discoveries at Lookout, Mooses Tooth, Rendezvous, Spark and Altamura. And in the winter of 2008-09 ConocoPhillips drilled two new wells, the Grandview No. 1 and Pioneer No. 1, in the new unit, as part of a continuing strategy to better understand and eventually develop the Alpine-style play in northeastern NPR-A.

The purchase of new acreage close to Mooses Tooth in the September 2008 NPR-A lease sale, coupled with the relinquishment of more remote NPR-A leases in that same year, confirmed that overall strategy.

In May 2009, having just completed the drilling of the Pioneer No. 1 well, ConocoPhillips announced test results for that well, and for another Greater Mooses Tooth well, the Rendezvous No. 2, drilled in early 2001. The wells tested over a range of 500 barrels per day to 1,300 barrels per day of light oil, and an average natural gas production rate of about 1.5 million cubic feet per day for each well. The company said that it has no immediate plans to further delineate the finds but that it anticipates the accumulations possibly being developed as Alpine satellites.

Then in August 2009, faced with the expiration of dozens of NPR-A leases, ConocoPhillips worked out a deal with the Bureau of Land Management to preserve some leases by expanding the Mooses Tooth unit and forming an adjacent unit called Bear Tooth. The Mooses Tooth unit now stands at 164,014 acres, with a commitment by ConocoPhillips to spud a new exploration well by the third quarter of 2015. The Bear Tooth unit covers 105,655 acres, with a commitment to test an existing well, the Scout No. 1, and drill a new well by June 1, 2012.

Meantime, ConocoPhillips and Anadarko are moving forward with the permitting of their CD-5 Alpine West satellite field, located about halfway between the Mooses Tooth unit and the Alpine field. Alpine West, which will be the first field to go into production in NPR-A, requires the construction of a bridge and pipeline across the Nigliq channel of the Colville River, a construction project in some ways symbolic of the oil and gas industry’s movement west into the petroleum reserve.

The development of Alpine West will also represent continued satellite field development associated with the Alpine field, following the earlier development of the Fiord, Nanuq and Qannik Alpine satellites.

Profitable near infrastructure

Back near the core area of the central North Slope, the high-performance Beaufortian reservoir of the ConocoPhillips Palm discovery on the western edge of the Kuparuk field led to the construction of a new drill site and expansion of the Kuparuk River unit. This development serves as a reminder of how profitable exploration success close to the existing infrastructure can become, with a cluster of small satellite fields now operated by BP and ConocoPhillips around the major fields of Prudhoe Bay, Kuparuk River and Alpine.

And small independents Brooks Range Petroleum Corp. and Ultrastar Exploration LLC have been pursuing this type of exploration concept in recent years.

BPRC, the operating company for Alaska Venture Capital Group, a private investment group headed by Managing Director Ken Thompson, is leading a joint venture with two other private companies in a multiyear program to explore for light oil close to North Slope infrastructure. BPRC exploration is progressing in the area of Gwydyr Bay, on the Beaufort Sea coast north of the Prudhoe Bay unit.

BRPC drilled the North Shore No. 1 and the Sak River No. 1 wells in that area during the winter of 2006-07. In the following year the company sidetracked and tested North Shore No. 1 at more than 2,000 barrels of oil per day of high quality crude oil from the Ivishak formation. And in August 2009 Alaska’s Division of Oil and Gas approved the formation of the Beechey Point unit at North Shore — BRPC wants to fast track development of the find, perhaps using trucks to transfer the North Shore oil to a tie-in with the Kuparuk pipeline, with the development of several small oil accumulations in the area as a future possibility.

In the winter of 2007-08 the BRPC joint venture also drilled the Tofkat No. 1 well east of the village of Nuiqsut, taking 10 oil samples from four different sandstone reservoirs and finding six feet of net pay in the Kuparuk formation, the deepest zone tested.

The joint venture also drilled two sidetracks to find the edge of the Tofkat reservoir, and acquired 210 square miles of 3-D seismic over the prospect, previously called Titania.

Farther east, BRPC wants to do a seismic survey at the Slugger prospect, south of Point Thomson.

Ultrastar consists of another group of private investors, this time under the leadership of Managing Member Jim Weeks. For a number of years Ultrastar and its sister company Winstar have been doggedly trying to drill for small oil accumulations close to infrastructure, with the intent of hooking any viable discovery into existing North Slope production facilities and oil export arrangements.

In 2003 Winstar drilled the Oliktok Point State No. 1 well, which turned out to be a dry hole.

Undeterred, Ultrastar moved ahead with a plan to drill its Dewline Deep prospect north of Prudhoe Bay, testing rocks equivalent to the Prudhoe Bay field reservoir, as well as some secondary targets. Eventually, after a multiyear effort to find a workable combination of drill site and drilling rig, in early 2009 the company drilled the Dewline No. 1 well vertically from an ice pad using the Doyon Arctic Wolf rig, under an arrangement with Rampart Energy, the company which had subcontracted the use of this rig from FEX to drill for gas in the Nenana basin in the summer of 2009.

Ultrastar has remained tight lipped about the Dewline drilling results but appears to be sufficiently encouraged to want to drill a second Dewline well in 2010.

On the southeast side of the Kuparuk River unit, Italian oil major Eni drilled two wells in its Rock Flour unit in the winter of 2006-07, and one well at its Maggiore unit to the south of Rock Flour in that same year. Eni had entered Alaska in 2005 with its purchase of Armstrong Oil and Gas’ Alaska interests, following that deal with the 2006 purchase of the state leases that included Rock Flour and Maggiore.

Eni has not announced the results of its North Slope drilling.

On the southwest side of Kuparuk, Pioneer Natural Resources announced in May 2006 that it had found oil in Beaufortian and Brookian horizons in its Cronus No.1 well, but that the reservoir formations were too tight for viable production. Pioneer’s Hailstorm No. 1 well, south of Prudhoe Bay, drilled shortly before the Cronus well had proved to be a dry hole.

ConocoPhillips and Pioneer drilled the Antigua No. 1 well south of Prudhoe Bay in that same 2005-06 drilling season, but Pioneer later announced that well to be “unsuccessful.”

Immediately south of Prudhoe Bay, the Alaska Department of Natural Resource has placed the Arctic Fortitude unit in default because, the department said, operator Alaskan Crude Corp. has failed to meet an obligation to move a drilling rig on site to re-enter the Burglin 33-1 well. The status of the unit is currently the subject of litigation between Alaskan Crude and the state in the State Superior Court.

Nearshore Beaufort Sea

Another possibility for explorers seeking opportunities near the existing infrastructure is to look north, under the nearshore waters of the Beauf

National Petroleum Reserve-Alaska

People have long known of the petroleum potential of this huge land area — surface oil seeps and oil-stained rocks provide evidence of active petroleum systems. In 1923 President Harding established the area, then known as the Naval Petroleum Reserve No. 4, as a potential source of oil supplies for the U.S. Navy. When jurisdiction over the reserve was transferred to the U.S. Bureau of Land Management in 1976, the name of the reserve was changed to the National Petroleum Reserve-Alaska.

The U.S. government conducted two exploration programs in NPR-A, one that led to several years of drilling by the U.S. Navy following World War II and one coordinated by the U.S. Geological Survey in the 1970s and 1980s. The earlier of these campaigns focused on exploring for strategic quantities of oil and gas, while the later phase went to greater lengths to develop a detailed understanding of the geology of the area.

These programs resulted in more than 14,000 line-miles of seismic surveys, 126 exploration wells and the 1946 discovery of a modest-sized oil field at Umiat on the Colville River. In 1985 ARCO drilled the Brontosaurus well to test an Ellesmerian prospect but the well proved dry.

The northeastern edge of NPR-A lies just south of the western extension of the Barrow Arch structure associated with the Prudhoe Bay field, but the huge Colville basin — filled with sediments of the Brookian sequence, folded and thrust-faulted along its southern side, adjacent the Brooks Range — dominates the geology of NPR-A.

1999 lease sale

In the northernmost part of NPR-A a Beaufortian play associated with the Alpine field in the neighboring Colville River Delta has proved a fruitful line of exploration following the advent of modern NPR-A leasing with a lease sale in 1999. This exploration trend, extending west from the existing North Slope oil infrastructure, is discussed in the central North Slope section of this publication.

The 1999 lease sale covered just the northeastern part of the reserve and resulted in ARCO, Anadarko, Phillips Petroleum and BP all ending up with acreage positions. ARCO and Phillips both later became part of what is now ConocoPhillips.

Although Anadarko subsequently drilled its own Altamura No. 1 exploration well in northeastern NPR-A, the company has conducted most of its northern NPR-A exploration in partnership with ARCO and, later, ConocoPhillips, with ConocoPhillips as operator.

That partnership conducted drilling in the extreme northeastern part of the reserve, relatively near the Colville River and the Alpine field, but leases from the 1999 sale also hosted more remote drilling, substantially further west, by BP at Trailblazer in 2001 and by Phillips at Puviaq in 2003. Drilling at Puviaq, to the west of Teshekpuk Lake about halfway between the Colville River Delta and the city of Barrow, at the extreme northwest end of the coastal plain, involved staging a drilling rig on an ice pad during the summer and using tundra off-road vehicles to transport personnel and equipment.

In a second northeast NPR-A lease sale in 2002, Phillips and Anadarko flagged their continued interest in the region by dominating the sale, building onto their existing lease positions. TotalFinaElf and EnCana Oil & Gas also bought leases at that sale, while BP confirmed its withdrawal from Alaska exploration by not bidding. In 2003 BP finally sold its NPR-A acreage from the earlier lease sale. EnCana dropped its NPR-A leases in 2004, eventually pulling the plug on all of its Alaska exploration interests toward the end of that year.

Northwestern NPR-A

Despite litigation by environmental groups concerned about the specter of oil and gas development expanding across much of the extreme northwest of Alaska, the U.S. Bureau of Land Management held its first lease sale for the northwestern part of NPR-A in June 2004. At that sale, Anadarko, ConocoPhillips, Pioneer, Petro-Canada and Fortuna Exploration all purchased leases. Fortuna, the Alaska subsidiary of Talisman, the Canadian independent that had already farmed into Total’s NPR-A acreage, would later change its name to FEX.

But, following disappointment at its remote Caribou 26-11 well, jointly drilled with Fortuna in February 2004, Total appeared to lose interest in NPR-A, choosing not to bid in the June 2004 lease sale and assigning some of its leases to FEX.

The ConocoPhillips and Anadarko partnership continued its remote NPR-A exploration program by drilling two wells at the Kokoda prospect, at the end of a 70-mile ice road, in 2005. And in 2005 Anadarko told Petroleum News that its strategy in these remote areas was the discovery of large “anchor” fields that would be viable to develop and then form hubs for the development of smaller fields.

Also in 2004 and 2005, Pioneer signed NPR-A exploration agreements with ConocoPhillips and Anadarko, agreements that involved the acquisition by Pioneer of a 20 percent working interest in NPR-A acres and adjacent offshore acreage, additional to Pioneer’s existing NPR-A holdings. In early 2007 ConocoPhillips, in partnership with Pioneer, drilled two NPR-A wells, both a long way from infrastructure: the Noatak No. 1 well, just north of Kokoda, and the Intrepid No. 2, south of Barrow, at the far western end of the North Slope, about 200 miles from the oil infrastructure of the Alpine field.

But in May 2007 ConocoPhillips declared both the Noatak and Intrepid wells to be noncommercial.

FEX: looking for big numbers

In the winter of 2005-06 FEX completed the Aklaq 2 well, the first of its NPR-A exploration wells, at a remote site some 140 miles west of Prudhoe Bay, using a Nabors drilling rig staged at Smith Bay on the Beaufort Sea coast. The company also shot some 3-D seismic on its leases. Talisman Executive Vice President John ‘t Hart said FEX was “looking at very big numbers” from its Alaska acreage — on the order of 250 million barrels of oil equivalent per prospect — with the potential to exceed 1 billion boe.

In July 2006 the U.S. Court of Appeals for the 9th Circuit affirmed a 2005 decision by the U.S. District Court for Alaska to reject the appeal against the June 2004 northwest NPR-A lease sale, thus clearing the way for oil and gas drilling in that part of the reserve. In September of that year, however, the District Court put a halt to a planned northeast NPR-A lease sale, following an appeal by a number of environmental groups against that sale. The appeal, which was also supported by the North Slope Borough, focused on a proposal to open for leasing an environmentally sensitive area around Teshekpuk Lake, an area thought to be prospective for oil and gas because of its proximity to the Barrow arch, the geologic feature associated with most of the operational northern Alaska oil fields.

BLM did proceed with a northwestern NPR-A lease sale in September 2006, with FEX and Petro-Canada picking up substantial acreage. ConocoPhillips and Anadarko also bought some leases in the southern and central part of the northwestern planning area.

In the winter of 2006-07, in a two-rig program involving the use of Doyon’s Arctic Wolf rig, transported from Prudhoe Bay, as well as the rig staged at Smith Bay, FEX drilled the Aklaqyaaq-1, Amaguq-2 and Aklaq-6 wells in northwestern NPR-A, eventually suspending three of the wells and plugging and abandoning Amaguq-2, which the company said was “subcommercial given current infrastructure.”

300 million to 400 million barrels

But the company also revealed that it had encountered more than 225 feet of net hydrocarbon-bearing sandstones in several formations in two wells it had drilled and suspended. Based on log analysis and “strong gas and oil shows, including oil staining and free oil in the drilling mud in one of the wells,” it said the “initial estimate of contingent resources present” in the formations of the two suspended wells was “300-400 million barrels” net to FEX, which had a 60 to 80 percent working interest in the leases with Petro-Canada.

However, Tim England, Talisman’s senior manager of exploration, told Petroleum News in 2007 that FEX was pressing the pause button on its NPR-A exploration drilling, choosing instead to shoot some new 3-D seismic and spend some time evaluating its project areas. England commented on the high cost of drilling far from infrastructure in Alaska, and he also referenced the stymied northeast NPR-A lease sale program, saying that future drilling decisions would be driven in part by whether BLM got back on track with its NPR-A lease sales.

In September 2008, BLM finally held a lease sale for northeastern NPR-A, having withdrawn from the sale area the contentious land north and east of Teshekpuk Lake. ConocoPhillips, Anadarko, Petro-Canada, FEX and newcomer Petro-Hunt LLC all picked up NPR-A acreage in the sale. Petro-Hunt later relinquished its leases, as a consequence of the crash in oil prices later in 2008.

Following the lease sale Richard Garrard, FEX’s geoscience manager in Alaska, told Petroleum News that the company’s new leases built on its existing NPR-A position and that the company was reaching a point where it would be able to interpret a large 3-D seismic program shot on the company’s NPR-A acreage.

In January 2009 ‘t Hart told the Alaska Support Industry Alliance that FEX would not drill again in NPR-A until 2011, at the earliest.

In the 2008 NPR-A lease sale ConocoPhillips bought leases that consolidated its position around the Mooses Tooth unit, in the extreme northeast of the region, while Anadarko and Petro-Canada extended their lease positions around a natural gas play near Umiat — that play is discussed in B

Brooks Range foothills

The foothills and the northern front of the Brook Range afford excellent opportunities to examine surface outcrops of rocks that lie deep underground elsewhere, and in recent years the region has become a subject for detailed investigation by a team from the Alaska Division of Geological and Geophysical Surveys in collaboration with the Alaska Division of Oil and Gas, USGS and oil industry geologists. Near the North Slope haul road the team found potential reservoirs and potential oil and gas source rocks equivalent to some of the more prolific sources of the North Slope. Oil stained sands in the area provide tantalizing evidence that oil migrated through the rock units. Geologists have interpreted one oil-stained location about 40 miles south of Umiat as a former oil field now breached by erosion.

The DGGS team has also found substantial outcrops of Ellesmerian carbonate rocks with reservoir potential.

Folding of the Brookian strata in the foothills gives rise to the potential for structural traps that are unlikely to exist farther north. This Brookian structural play is associated with the Umiat oil field. Several other small accumulations have been discovered in the fold belt trend of NPR-A, but they contain mostly gas.

In fact the relatively high thermal maturity and leaner organic content of Brookian rocks in most of the foothills area points to the formation of natural gas rather than oil — most people consider the Brooks Range foothills to be a gas prone province. However, evidence such as the Umiat oil field, oil-stained rocks at the surface and the discovery of at least some oil-prone source rocks in the region hints at the existence of some oil, perhaps derived in part from Ellesmerian or Beaufortian source rocks.

Umiat

The 1999 BLM northeastern NPR-A lease sale, although triggered by an interest in exploration west of the Colville River delta, opened the possibility of oil and gas leasing around the Umiat oil field, in the southeastern corner of the lease sale area. Low oil prices at that time discouraged Umiat development, but as prices started to climb a few years later the field caught the attention of Texas-based Renaissance Alaska LLC, spurring Renaissance to progressively buy into the relevant federal and state leases, to establish a lease position over the field.

In February 2008 Renaissance deferred an initial plan to drill seven or eight appraisal wells in the Umiat structure, electing instead to “de-risk” field development with a 3-D seismic survey. In September 2009 the company told Petroleum News that it was waiting for evidence of sustained high oil prices before making a decision on whether to proceed with development drilling at the field, saying that the seismic data coupled with data from the old wells drilled by the U.S. Navy had furnished sufficient information to determine whether development is viable.

A new assessment by Ryder Scott Co. had indicated that the two main reservoir sands in the field may contain about 250 million barrels of economically recoverable light, sweet 37 API oil, said Jim Watt, Renaissance president and CEO. There may be more than 700 million barrels of oil in place in those horizons and, when added to other oil in the shallow sands that have given rise to some well known oil seeps at Umiat, there may be more than 1 billion barrels of oil in place in the field, Renaissance thinks.

Renaissance is in the process of developing a business plan for Umiat, a plan that envisages the delivery of oil by pipeline to pump station 2 of the trans-Alaska oil pipeline. However, because the deepest oil at Umiat is only about 1,400 feet below the surface, the oil will be produced at temperatures of just 28 to 32 F, low temperatures that will present some unusual production challenges — Renaissance envisages pumping the oil, cold, down the export pipeline, rather than trying to heat up the oil for shipment.

Gas exploration

Apart from the work at the Umiat oil field, the gas-prone nature of the foothills petroleum geology, the known existence of some gas fields near Umiat and some significant moves toward the development of a natural gas export pipeline from the central North Slope have together triggered more of an interest in gas exploration in the foothills.

Anadarko has for more than a decade been the leading figure in this play.

In August 1998, the company signed an exclusive exploration agreement with Arctic Slope Regional Corp., granting Anadarko exploration rights for up to 3.3 million acres in the foothills region. Anadarko later brought in Alberta Energy Co. subsidiary AEC Oil & Gas (subsequently to become EnCana) and BP as one-third partners. Anadarko retained operatorship.

Anadarko said that it was interested in exploring for both oil and natural gas in the foothills, although the company has increasingly focused on natural gas in the region.

In state foothills lease sales held in 2001 and 2002, a partnership between Anadarko and EnCana added state acreage to their foothills portfolios, while EnCana purchased some leases in BLM’s June 2002 NPR-A lease sale.

But in 2003 BP sold its foothills lease position to Anadarko as part of a BP strategic move to exit Alaska exploration. In early 2005 Anadarko established a new foothills partnership with Petro-Canada. Then, following EnCana’s departure from Alaska in 2005, Anadarko found another foothills partner, BG Group, to buy a one-third interest in the acreage held by Anadarko and Petro-Canada.

In the 2006 state areawide lease sale for the foothills region, Anadarko, Petro-Canada and BG jointly purchased additional acreage. Anadarko and Petro-Canada also bought some foothills acreage in the 2008 northeast NPR-A lease sale.

Anadarko and its partners had conducted seismic surveys in their foothills acreage but had been holding back on drilling, looking for a reasonable possibility of the development of a North Slope gas pipeline for the export of foothills gas. In 2007, with the passing of the state’s Alaska Gasline Inducement Act, or AGIA, momentum toward gas pipeline development grew, thus upping the possibility of foothills gas ultimately become marketable.

During the winter exploration season of 2007-08, Anadarko, with partners BG and Petro-Canada, used Nabors rig 105-E to drill the Gubik No. 3 well and start drilling the Chandler No. 1 well, the first wells in northern Alaska to specifically target natural gas. Then, having over-summered the rig at Chandler on an insulated ice pad, Anadarko completed the drilling of the Chandler well in the winter of 2008-09.

Both wells sit near Umiat, near or at the known Gubik gas field, in Arctic Slope Regional Corp. land just outside the eastern boundary of NPR-A. Discovered by the U.S. Navy in 1951, Gubik is thought to hold some 600 billion cubic feet of recoverable gas in the Tuluvak and Nanushuk formations.

Chandler No. 1, about six miles southwest of Gubik No. 3, was drilled to about 10,200 feet; Gubik had a total depth of about 4,300 feet. According to Petro-Canada filings with the U.S. Securities and Exchange Commission, the Gubik No. 3 well tested at rates up to 15 million cubic feet per day of natural gas.

Also in the winter of 2008-09, Anadarko used the Doyon Arctic Fox rig to drill the Wolf Creek No. 4 well, at the site of another known gas accumulation in federal land inside NPR-A, about 40 miles west of Umiat.

Anadarko refers to the system of gas fields that it is evaluating as the “Gubik Complex.”

Shipping the gas

The question of how companies exploring for gas in the Umiat area might eventually ship their gas to market depends on whether and when a main gas export line from the North Slope might be constructed — an obvious option would be to run a feeder gas line from Umiat over to the North Slope line. However, another option being considered both by the state and by Enstar Natural Gas Co, the main Southcentral Alaska gas utility, is a “bullet line” that would feed gas direct from the foothills into the Anchorage area, to supplement or replace the dwindling supplies of Cook Inlet gas for utility and industrial use.

The Alaska Natural Gas Development Authority has also proposed a spur line into the Anchorage area from a future North Slope gas line, and this type of spur line could also feed foothills gas into Southcentral Alaska.

Mark Hanley, Alaska public affairs manager for Anadarko, told Alaska legislators in February 2009 that gas was unlikely to be available to flow to market from any foothills gas field before 2016. If a North Slope export gas pipeline is constructed, that line would not come into operation until several years after that.

Renaissance has suggested that its development of the Umiat oil field, together with the Anadarko-led gas development in the area, could enable the sharing of environmental studies and pipeline or road rights of way among multiple projects, thus reducing project costs and perhaps establishing an Umiat bridgehead for further exploration and development in that part of NPR-A. And the state is considering building a gravel road from the Dalton Highway to Umiat, to support oil and gas development in the Umiat area.

But the acquisition of Petro-Canada by Suncor Energy in August 2009 has thrown another unknown into the foothills gas development equation: Suncor sees oil sands as its prime growth area and has been planning to sell some of its natural gas assets.

Beaufort and Chukchi seas outer continental shelf

A lack of infrastructure, harsh weather and extensive sea ice have long presented formidable barriers to anyone interested in exploring for oil in the remo

Business opportunities and challenges in northern Alaska

And although in the early days of the North Slope viable oil development in remote territory at vast distances from oil markets required giant oil fields, the established oil infrastructure is now opening up the possibility of bringing more modest-sized fields on line, as the older fields decline. In fact, the Oooguruk field processes its products in facilities at Kuparuk, and potential access to the existing infrastructure has led to active exploration in the Prudhoe Bay area by small companies such as Brooks Range Petroleum and Ultrastar.

Charter for development

A key factor, especially for small companies wanting to explore on the North Slope, is the existence of the Charter for the Development of the Alaskan North Slope, the charter that resulted from the settlement between the State of Alaska, BP and ARCO when BP purchased ARCO in 1999. Under the charter both BP and ConocoPhillips, the two major North Slope operators, have to be willing to negotiate the shared use of their facilities with new producers, and must buy third-party oil for shipment down the trans-Alaska oil pipeline. The charter also makes certain seismic data available to small companies, a major factor in reducing exploration costs.

However, companies wanting to negotiate facility access need to recognize that facility sharing will incur costs, including the potential cost of the impact of third party processing on production from the facility operator’s own fields.

And the cost of shipping oil to market, including the tariff for shipping the oil on the trans-Alaska pipeline and the cost of carrying the oil by tanker from Valdez at the southern end of the pipeline, is a major factor in the economics of North Slope oil. The pipeline tariff, a topic of much controversy and dispute among oil shippers, pipeline owners, government regulators and the State of Alaska, tends to rise as North Slope production declines, as the pipeline fixed costs become spread across progressively fewer barrels of oil.

On the other hand, the trans-Alaska oil pipeline owners and Alyeska Pipeline Service Co. have done major upgrades to the pipeline system and the Valdez Marine Terminal, to improve the pipeline system efficiency and to enable the pipeline to more cost-effectively adjust to variations in throughput.

Very expensive

Oil exploration and development in northern Alaska is also much more expensive than in, say, the Lower 48, in part because of the logistical difficulties of working in a harsh climate in an extremely remote region, and in part because of the seasonal nature of most work.

The seasonal nature of the work results from the fact that, onshore, almost all off-road or off-gravel pad drilling or construction needs to be done during the winter, when the tundra is frozen and protected by a layer of snow. In fact, both the State of Alaska and the U.S. Bureau of Land Management have rules and procedures for determining when they will allow off-road travel on state or federal land, ensuring that the tundra will not be damaged but also limiting any work off the established road system to just a few months of the year.

And access to a remote site typically requires construction of an ice road, with the road construction adding to project costs and eating into the time available for work at the site.

During a remote exploration drilling project, for example, it may only be possible to drill a single well in one winter exploration season; it then becomes necessary to wait until the following winter to drill another well. If a new field is found, appraisal drilling may extend over several winter seasons, significantly delaying the start of field production.

This seasonality of exploration and development characterizes the steady march west toward and into northeastern NPR-A by ConocoPhillips and Anadarko, with the drilling of one or two new wells each winter. And in the foothills around Umiat Anadarko and its partners have been doggedly proceeding, a well or two at a time, in their investigation of the gas potential of what they term the “Gubik Complex.”

Environmental permitting is also a critical issue for oil companies operating on the North Slope — no one can allow environmental mismanagement or an environmental disaster to damage the fragile Arctic environment. A serious environmental incident could cause irreparable damage to the oil industry’s “license to operate” in the far north.

However, despite a view among some that strict environmental controls in Alaska place difficult obstacles in the way of would-be oil and gas explorers, and criticism of what some perceive as undue complexity in the permitting process, independent companies such as Anadarko, Pioneer, Brooks Range Petroleum and Ultrastar have demonstrated that, with appropriate expertise, the maze of environmental regulations can be successfully mastered.

OCS challenges

Exploration on the outer continental shelf of the Beaufort and Chukchi seas introduces a whole set of special challenges, including the immensely high cost of operating in ice-infested seas in a region of great environmental sensitivity. OCS exploration and development is the domain of major oil companies, with Shell spearheading efforts to expand exploration into the Arctic offshore, and with ConocoPhillips also adding OCS prospects to its exploration portfolio.

The standard mode of operation for offshore drilling involves the use of an ice-reinforced drilling vessel, guarded from sea ice by ice breakers. Drilling has to be carried out during the relatively short open water season, lasting perhaps from early July into late October.

And, just to support its oil spill contingency plan for drilling in the Beaufort Sea, Shell has assembled a formidable fleet that has included a new purpose-built oil spill response vessel, an oil spill response barge and a 500,000-barrel-capacity oil tanker.

But Shell, hoping to start an aggressive Beaufort Sea drilling program in 2007, ran into a barrage of opposition from environmental groups, concerned about the possible impact of industrial activities on the delicate offshore environment, and by North Slope communities, concerned both about environmental impacts and about possible disruption of their traditional subsistence hunting, especially the hunting of bowhead whales.

Oil spill response

In addition to questioning the impact of industrial noise on marine mammals, people have challenged the practicality of responding to an oil spill in ice-infested waters. Oil companies such as Shell say that, while modern drilling technologies have all but eliminated the possibility of a significant offshore oil spill, technologies and expertise for oil spill response have advanced to the point where an Arctic oil cleanup is very practical. Critics say that the risk of an offshore oil spill cannot be eliminated and that oil recovery techniques for use in ice-laden waters are as yet unproven.

The North Slope Borough, in particular, has expressed concern about the speed and scale of what Shell had originally proposed to do. In fact, although most North Slope communities support onshore oil and gas development, those same communities have many reservations about offshore development, often characterizing the Arctic seas as their “garden,” an essential resource for their traditional culture.

In response, Shell says that it respects the needs of the North Slope communities, and is taking care to accommodate those needs. The company says that offshore oil and gas development will provide jobs and careers for Alaskans, and that new oil from offshore will extend the life and improve the economics of the trans-Alaska oil pipeline, as well as provide new sources of much needed oil for the United States.

Following litigation that has prevented Shell from commencing its planned drilling in the Beaufort Sea, the company has now significantly scaled back its offshore drilling plans. The company says that it is responding to the concerns of the North Slope communities. In the open-water season of 2010 the company hopes to be able to demonstrate that it can drill safely in the Arctic offshore, by drilling two wells in the Beaufort Sea and one well in the Chukchi Sea. ConocoPhillips hopes to drill in the Chukchi Sea in 2011.

North Slope gas pipeline

Work by TransCanada and ExxonMobil toward the Alaska Pipeline Project, and by Denali – The Alaska Gas Pipeline, is bringing closer the possible construction of a pipeline to transport natural gas from the North Slope to the Lower 48. And the future possibility of a North Slope gas pipeline has some bearing on the focus of petroleum exploration and development in northern Alaska.

On the North Slope, BP is planning how best to transition into gas production at the giant Prudhoe Bay field, the biggest initial source of gas for a pipeline. To date, gas produced from the field has been mostly re-injected into the field reservoir to maintain reservoir pressure and to coax as much oil as possible from the reservoir rock. BP, working in conjunction with the Alaska Oil and Gas Conservation Commission, must find a way to produce gas without unduly compromising the ultimate volume of oil recovered from the field.

To the east of Prudhoe Bay, ExxonMobil has finally started development drilling at the Point Thomson field, the other field considered to be a primary source of gas for a gas pipeline. Point Thomson is

Petroleum geology of northern Alaska

The oldest rock sequence, the Franklinian, formed on a stable continental platform before middle Devonian time (about 400 million years ago). The sequence contains a wide range of rock types, some of which may have been laid down as sediments on subsea slope deepening to the south.

The Franklinian sequence is often considered nonprospective “basement” due to its high thermal maturity and generally poor reservoir quality. However, shows of migrated oil are common in basement penetrations along the Barrow Arch; wells in the Point Thomson area have penetrated zones of dolomites with reservoir potential; and the Point Thomson gas condensate reservoir includes Franklinian carbonates. Economic production from pools in the Franklinian remains a possibility at some point in the future.

Franklinian sequence deposition ended across most of northern Alaska with a cycle of middle to late Devonian mountain building and metamorphism.

The Ellesmerian

Ellesmerian sediments, eroded from uplifted Franklinian rocks in a landmass that lay mostly to the north of the modern Beaufort Sea coast, spread southward and accumulated in the coastal and marine settings of an ancient basin known as the Arctic Alaska basin. Deposition of these sediments on a continental margin, sloping to the south, persisted into early or middle Jurassic time.

Deposited in highly varied marine-to-nonmarine settings over at least 150 million years, Ellesmerian strata constitute a diverse suite of rock formations, including prolific petroleum source rocks, excellent reservoirs and strong seal units that collectively define a self-contained, world-class petroleum system.

The strata of the Ellesmerian sequence tend to thin to the south, under the North Slope, because of the increasing distance from the source of the sediments in the north. They also tend to thin to the north of the North Slope, in the area of the ancient Ellesmerian landmass, in part because deposition was truncated against the landmass and in part because later uplift caused erosion of any sediments that had earlier been deposited.

The Beaufortian sequence

The Beaufortian sequence dates from between early to middle Jurassic and early Cretaceous and resulted from sediment deposition during major rifting or pulling apart of the earth’s crust. People have proposed several hypotheses for this rifting. However, most geologists interpret the rifting as a result of the opening up of the Canada basin of the Arctic Ocean by a counterclockwise rotational movement of the North Slope Ellesmerian landmass away from equivalent platform rocks in Arctic Canada.

The east-west trending structural high known as the Barrow arch developed along the present Beaufort Sea coast. According to the most widely accepted Beaufortian rift model the arch formed in multiple uplift phases. The northern flank of the arch slopes steeply in a system of faults toward the Canada basin of the Arctic Ocean. The southern flank slopes very gently.

Widespread surface erosion along the Barrow arch probably occurred several times but culminated during the early Cretaceous to form an unconformity of regional east-west extent. This lower Cretaceous unconformity forms an important hydrocarbon migration and accumulation element for many of the oil fields on the North Slope, including the Prudhoe Bay field.

Most of the Beaufortian sediments eroding from the rising Barrow arch likely drained off the gentle southern flank of the arch, where they later became buried deep beneath younger sediments of the Brookian sequence. Other erosion products from the Barrow arch no doubt drained into the depths of fault-dropped blocks on the north side of the arch. Beaufortian sediments also accumulated in a variety of mostly shallow marine settings on the uplifted margin of the Barrow arch. These sediments formed important sandstone reservoirs in subtle low points on the arch or perched on rift-related fault blocks stepping off the arch to the north. Key examples include the Lower Cretaceous Kuparuk formation sandstones of the Kuparuk River and Point McIntyre fields and the Upper Jurassic Kingak formation sandstones of the Alpine field.

The Brookian

Also in late Jurassic and early Cretaceous time the Brooks Range started to form, sending thick sheets of thrust-faulted rock to the north. These thrust sheets loaded and depressed the earth’s crust and caused a deep depression called the Colville basin to start to sink along the northern side of the range, between the range and the Barrow arch.

Sediments eroded from the Brooks Range thrust sheets poured into the Colville basin, progressively filling the basin from southwest to northeast and forming the Brookian sequence. Brookian sediments also spread out over the Barrow arch and onto Alaska’s continental margin during Cretaceous-through-Tertiary time.

In very general terms, the older, lower Brookian sequence sediments tend to consist of shales and sandstones deposited in water hundreds or thousands of feet deep. The rocks higher in the sequence typically consist of sandstones and shales associated with coastal plains, river deltas or other shallow-water environments.

While sediments filled the Colville basin, the area of active sedimentation moved eastward. As a result, the Brookian rocks tend to become younger from west to east in the basin.

Nowadays Quaternary sediments cover the older bedrock along the North Slope. Most Quaternary deposits consist of unconsolidated sand and gravel, containing re-worked Brookian sediments along with materials from the present-day Brooks Range. Overlying these deposits are river-deposited silts and sandy silts that include variable amounts of organi