North Slope Foothills bidders set record for acres leased in state sale

Petro-Canada dominant player in 1.1 million acre, $10.3 million sale

Kristen Nelson

PNA Editor-in-Chief

The state of Alaska held two areawide lease sales in Anchorage May 1. The North Slope Foothills sale brought in $10,266,086.40 in apparent high bonus bids and at 1,119,360 acres (201 bids on 197 tracts) was the most acreage ever leased in a state sale, Division of Oil and Gas Director Mark Myers said. The state’s first foothills areawide sale in May 2001 drew 184 bids for 170 tracts — 858,811 acres, a record amount of acreage at that time.

The Cook Inlet sale, which garnered $581,290.02, saw both companies and individuals grabbing leases around prospects. Companies that took acreage included Marathon Oil Co., Northstar Energy Group and Forest Oil Corp.; individuals were Monte J. Allen, Robert Bolt, Paul L. Craig, Daniel K. Donkel and Richard E. Wagner.

Petro-Canada takes 179 tracts

Acreage breakouts by bidder weren’t immediately available, but based on tracts taken and dollars bid, Petro-Canada Alaska Inc. dominated the foothills sale, with apparent high bonus bids of $8,526,681.60 (83 percent of the sale dollars) on 179 tracts.

Petro-Canada took 56 tracts in the 2001 sale, and while leases for those tracts haven’t yet been issued, Myers said that it appeared the combination of sales would put Petro-Canada over the 500,000 acre maximum for state acreage. The company can bring in partners on acreage to cut its position, he said.

A bidding group of 50 percent Anadarko Petroleum Corp. and 50 percent EnCana Corp. was apparent high bidder on 13 tracts for $1,575,302.40. Bidding by itself, Anadarko took four tracts for $128,332.80, and Unocal took a single tract for $35,769.60.

The Anadarko-EnCana bidding group had the highest bids per acre: $74.34 an acre for tract 200 and $73.89 an acre for tract 195.

Across the sale area

And, while Petro-Canada took the farthest west tracts in the 2001 sale, it took tracts 144 miles farther west this year, clear to the edge of the National Petroleum Reserve-Alaska, 49 tracts east and south of NPR-A.

The company took no leases on the sale’s eastern edge in 2001, but this year took 95 leases in the northeast corner adjacent to the Arctic National Wildlife Refuge.

The remainder of the company’s bids are spread across the central portion of the sale area, some adjacent to 2001 Petro-Canada leases and some adjacent to tracts taken by other companies in the 2001 sale.

Others filling in

Two of the four tracts taken 100 percent by Anadarko Petroleum are on either side of the trans-Alaska oil pipeline 12 miles south of the Umiat Meridian. The other two are south of leases Anadarko and AEC took in the 2001 sale, 30 miles south of the Umiat Meridian and just east of the Kuparuk River. Anadarko’s total expenditure at the sale, including the 13 tracts it took in 50-50 partnership with EnCana Corp., was $915,984.

Unocal took a single tract for $35,769.60 on the Itkillik River on the northern border of the sale area adjacent on the south to three tracts it took in the 2001 areawide sale.

Craig top bidder at Cook Inlet sale

Marathon Oil was the second highest bidder, taking two tracts offshore just north of Ninilchik adjacent to other Marathon tracts for $108,633.50 (18.7 percent of high bids.)

Northstar Energy Group bid $90,588.96 (15.6 percent of high bids) for three leases on the west side of Cook Inlet crossed by the Cook Inlet pipeline inshore from Redoubt Bay.

Monte J. Allen bid $56,286.86 on two tracts and also bid $20,236.80 as a one-third partner in a bidding partnership of Daniel K. Donkel, Robert Bolt and Allen, for a total of $78,502.66 (13.5 percent of total high bids). Allen’s 100 percent interest tracts are in Cook Inlet, one at Kalgin Island and the other due west, adjacent to another lease in which Allen has an interest south of the Drift River terminal facility. The Donkel-Bolt-Allen tracts are also in Cook Inlet, one off the northeastern edge of Kalgin Island and the other to the northeast adjacent to a block of leases in which Allen has an interest.

Forest Oil Corp. spent $61,772.80 for three leases (10.6 percent of high bids), two adjacent to Forest’s Redoubt Shoal unit; on the west side near the Pretty Creek gas field.

Donkel and Bolt took three tracts bidding as a 50-50 partnership, and combined with the tracts they took in the Donkel-Bolt-Allen bidding group, each spent $41.356.80 (7.1 percent of the apparent high bids): one in Cook Inlet east of the North Middle Ground Shoal gas field, one adjacent on the east to Forest leases south of the North Cook Inlet field in mid-Cook Inlet and the third adjacent to the North Cook Inlet unit.

Richard E. Wagner bid $29,286.50 for two leases (5 percent of the total high bids). The leases are seaward of BBI leases adjacent to the Kenai Peninsula shoreline at Nikiski.

The Cook Inlet areawide sale was held open until 4 p.m. pending a judge’s decision on six leases on which bids were received after the deadline. The Department of Natural Resources decision not to accept the bids was challenged in court. Myers said the judge ruled the commissioner had the discretion to accept the leases and that it was also in his discretion to refuse to accept them.

Delta gas player takes major Foothills position

Gary Park, PNA Canadian correspondent

In adding 1.015 million net acres of North Slope Foothills exploration prospects to the 323,000 acres it acquired last year, Petro-Canada is setting itself up to ship natural gas from both Alaska and the Mackenzie Delta, company spokesman Chris Dawson told PNA May 1.

“Obviously, more than ever, we think (the North Slope) region has great potential,” he said. “Ultimately we think that both areas will be tied in.”

Petro-Canada will now start “pouring over the data compiled so far (for the North Slope Foothills), which is minimal,” but because the geology is so similar to that of the prolific Rocky Mountain foothills of British Columbia and Alberta the level of optimism is high, Dawson said.

Expects to start seismic within two years

Dawson said Petro-Canada, through its wholly owned Petro-Canada (Alaska) Inc. subsidiary, paid $8.5 million to obtain 179 of the 212 tracts offered in the latest North Slope Foothills sale. The total sale fetched $10.5 million, with prices ranging from $5 to $73 an acre. Petro-Canada’s average was $8.37 an acre.

Last year the Calgary-based integrated company paid $2.5 million at the state lease sale for its 323,000 acres, becoming the second major Canadian company to move into Alaska after Alberta Energy Co. Ltd. (now EnCana Corp.).

The land acquisition comes just two weeks after Petro-Canada and Devon Canada Energy Corp. announced a significant gas discovery on the Mackenzie Delta of 200 billion to 300 billion cubic feet of recoverable reserve potential. (See photo on upper left of page 1.)

That find “far outweighed” three unsuccessful wells on the Delta in the past two winters, and has given Petro-Canada the incentive to continue with an aggressive program in the region, Dawson said.

Although the details of next winter’s Delta exploration program are still being developed, the discovery moves Petro-Canada and Devon closer to the producers’ realm.

Part of Mackenzie explorers’ group

The Mackenzie Delta Producers Group — Imperial Oil Ltd., Shell Canada Ltd., Conoco Canada Ltd. — is working on its own plans to bring Delta gas into production as early as 2008.

Dawson said the explorers’ group, although “not officially at the table” with the producers, is holding talks with the Mackenzie Valley Aboriginal Pipeline Corp., which must obtain up to 500 million cubic feet of gas per day to gain a one-third equity stake in a Mackenzie Valley pipeline for Native communities.

Petro-Canada has taken a “route neutral” stance on pipelines from the North Slope and Delta, but does think the “over-the-top” option is “economically the most advantageous,” while conceding there are major environmental and political concerns to deal with, Dawson said.

“We hope the market will be able to decide which pipeline should be built,” he said, noting the comments earlier this week by Petro-Canada chief executive officer Ron Brenneman that the choice of pipelines should be .reached in a “free, open and deregulated” environment. (See related story on page 9, titled “Mackenzie pipeline viable.”)