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The Explorers 2008: Other explorers keep pressing forward Despite many challenges, tiny companies continue to prep drilling programs across the state Eric Lidji & Alan Bailey Petroleum News
High operating costs, remote locations and extensive regulations and bonding requirements can make Alaska a challenge for smaller independent oil and gas companies, but that doesn’t always stop them from trying.
Small companies have been exploring Alaska for more than a century.
In the 50 years since the discovery of oil on the Kenai Peninsula, and the 40 years since the discovery of Prudhoe Bay, those small companies continue to head north, lured by the possibly of a find too small for the bigger companies, but still big by Lower 48 standards.
The companies below are just a few of the smaller explorers interested in Alaska. Other companies like True North Energy, Fox Petroleum and Bald Eagle Energy hold oil and gas acreage in the state and are in various stages of exploration plans and negotiations.
ACC still plans on Burglin Alaskan Crude Corp. continues to work on two wells in Alaska, drilling the Amarex Moose Point No. 1 on the Kenai Peninsula and a re-entering the Burglin 33-1 well in the Arctic Fortitude unit on the North Slope.
Following a series of exchanges with the state Department of Natural Resources over the past year, the Texas-based independent company now has until March 31, 2009, to move a drilling rig onto the Burglin pad, located just a few miles southwest of Deadhorse.
Earlier this year, Alaskan Crude paid $60,000 to prevent the state from terminating the Arctic Fortitude unit. The state placed the unit in default this past spring after Alaskan Crude failed to mobilize a rig to the pad by May 15.
Citing difficulties in dealings with the Alaska Oil and Gas Conservation Commission, Alaskan Crude had asked the state for an extension to that deadline, but the state denied the request, as well as a subsequent appeal.
The Burglin 33-1 well was originally drilled in the 1980s. The state formed the Arctic Fortitude unit around the well in June 2006. The original plan of exploration called for Alaskan Crude to work over and test Burglin 33-1 by October 2007, as well as drill two new wells and shoot seismic over the unit by July 2010.
The principles of Alaskan Crude, James A. White and James W. White, own about 11,800 acres of state leases in the Cook Inlet basin and the North Slope.
In August 2008, Jim White of Alaskan Crude told Petroleum News, “We don’t hold leases that we don’t intend to drill. We still have outstanding issues. We’re hoping they can be timely resolved.”
Benchmark eyes winter 2009 Benchmark Oil and Gas continues to evaluate seismic and look for partners on a portfolio of leases stretching across the Kenai Peninsula.
Through the six months of 2008, the Swedish independent spent $150,000 evaluating and processing seismic data acquired last year, according to second-quarter filings.
Benchmark came to Alaska two years ago, purchasing more than 90,000 acres during a May 2006 state lease sale in Cook Inlet. The company picked up 20 leases spread across the north coast of the Kenai Peninsula, the central peninsula and north of Kachemak Bay in the southern part of the peninsula.
The southern Kenai Peninsula remains a fairly undeveloped area occupied by several companies like Renaissance Alaska, the Chevron-owned Union Oil Company of California, Armstrong Oil, Alliance Energy, Pioneer Natural Resources and Aurora Gas.
Benchmark said it remains in discussions with “other operators in the area to establish partnerships.” The company hopes to sell 25 percent of its working interest.
On its Web site, Benchmark suggests it might drill a well in Alaska during the winter of 2009 and 2010, and called Cook Inlet “a large expansion opportunity.”
Benchmark currently produces around 141 barrels of oil equivalent per day from several prospects in Texas. As of January 2008, the company reported 2.185 million barrels of oil equivalent in proven and probable reserves.
Escopeta talking “giants” For nearly a decade now, Houston-based independent Escopeta Oil has been trying to prove that massive oil and gas prospects remain unfound in the Cook Inlet basin.
The company holds around 81,340 acres in Cook Inlet, divided between the offshore Kitchen unit north of Nikiski and the onshore North Alexander unit near the mouth of the Susitna River in the upper Cook Inlet basin, across the inlet from the Kenai Peninsula.
Escopeta first took interest in Alaska back in the early 1990s, but the recent push didn’t start until the end of the decade, as the company began accumulating a land position.
Based on a re-evaluation of old seismic data shot over its offshore acreage, company President Danny Davis now believes the prospects at Kitchen could contain a combined 7.5 trillion cubic feet of natural gas and 1.7 billion barrels of oil.
If correct, those reserves would alter the supply dynamics in the region.
The company got some validation from a 2004 U.S. Geological Survey report suggesting several “missing giants” remained to be found in the Cook Inlet.
By early 2006, Escopeta secured a jack-up rig, and that summer got unprecedented federal approval to bring the rig from the Gulf of Mexico to Alaska using a foreign vessel. Despite the good news, trouble getting the rig north delayed the drilling program.
This year has been one of tentative optimism for Escopeta.
The state gave Escopeta a one-year reprieve on its work commitments at the Kitchen unit, and now the company hopes to get time on another jack-up rig headed north, this one brought by Pacific Energy, which also hopes to drill offshore prospects in the Cook Inlet.
In May, Davis said Escopeta had finished permitting wells for a drilling program at North Alexander. Pacific Energy is set to operate that program, scheduled to begin this winter.
GeoPetro to drill in 2009 Quickly and quietly over the past three and a half years, San Francisco independent GeoPetro Resources accumulated land and moved ahead on a drilling program in Cook Inlet. Now the company hopes to start drilling next spring.
Through the purchase of Pioneer Oil’s Cook Inlet acreage in 2005, and later bulking up its land position with Alaska Mental Health Trust acreage, GeoPetro has assembled nearly 122,000 acres spread across Trading Bay and Point MacKenzie.
Through 2006 and 2007, GeoPetro did little work in Alaska, choosing to focus company resources instead on projects in Texas and Indonesia, and to look for partners.
Although originally interested in the coalbed methane potential at Point MacKenzie, GeoPetro reassessed after seismic data showed significant conventional gas potential.
GeoPetro now plans to spend up to $5 million on an exploration program around Point MacKenzie, north of Anchorage. The program will focus on the Midnight Sun prospect.
As of late August, GeoPetro said it had identified a drilling rig, completed initial permitting and secured bonding for the Frontier Spirit well, which it hopes to spud in May 2009 to test the middle and lower Tyonek formations at a depth of about 8,000 feet.
The proposed well location is only two miles from an existing Enstar pipeline.
GeoPetro is looking for industry partners on the project, Eric Doshi, with investor relations for the company, told Petroleum News in late July 2008.
Doshi called Alaska the “second priority” for GeoPetro after the company’s four producing gas wells at the Madisonville Field north of Houston.
“In terms of exploration, Alaska’s the one we’re most excited about,” Doshi said.
Iona swims with big boys Amid the multi-national oil companies bidding multi-millions at the February 2008 lease sale for the Chukchi Sea, newcomer Iona Energy Co. managed to walk away with a tract in one of the most prospective untapped basins in the world.
“We’re just excited to acquire one block,” Iona Chief Executive Officer Neill Carson told Petroleum News on Feb. 26.
The tiny independent, formed in 2007 by Carson and Chief Financial Officer Brad Gunn, maintains offices in Aberdeen, Scotland and Calgary.
Carson and Gunn met at the Calgary and London-based Ithaca Energy Inc., an independent focused on exploration and production in the United Kingdom Continental Shelf in the North Sea, looking for opportunities passed over by larger companies.
Ithaca successfully brought several wells into production.
Iona plans to pursue leases through sales, licensing rounds and divestments, according to Carson. This past May, Iona joined 192 other companies applying for North Sea leases. Carson kept the door open on future lease sales in Alaska, calling the state “appealing,” but said any decision would depend on the situation at the time.
Using recently acquired seismic, Carson said Iona would evaluate its lease to determine any next steps. The federal government has yet to assign the leases from the sale.
Renaissance plans CI wells Renaissance Alaska combines pedigree with some choice acreage.
The company holds nearly 108,000 acres in three parts of the state: near the Umiat oil field on the eastern border of the National Petroleum Reserve-Alaska; offshore in the waters of the upper Cook Inlet; and onshore near the southern tip of the Kenai Peninsula.
But like many small companies in Alaska, trouble securing financing and a rig at the same time has kept Renaissance from drilling a well in Alaska.
This past winter the company hoped to drill up to eight exploration wells near Umiat with the Doyon-Akita Arctic Wolf, but funding challenges and a short travel season on the fragile tundra led the company to postpone the program.
Renaissance ended up shooting 85 square miles of seismic over the Umiat leases.
Renaissance is currently permitting four exploration wells in Cook Inlet, and hoping to get time on a jack-up rig slowly working its way up to Alaska.
The company hopes to drill the wells sequentially before the end of next year, starting with North Middle Ground Shoal State No. 1 well in Trading Bay.
The remaining three wells surround the ConocoPhillips-operated North Cook Inlet unit east of the village of Tyonek, and would attempt to delineate the Northern Lights prospect, previously known as Tyonek Deep and Sunfish back when ARCO and Phillips attempted to develop the field in the late 1990s.
Renaissance principal Mark Landt oversaw several key wells in that program when he worked in Cook Inlet as a land manager for ARCO in the early to mid-1990s.
Previous estimates of the Northern Lights prospect suggest the field could contain between 111 million and 358 million barrels of oil equivalent.
Spain’s Repsol enters as offshore partner In September 2007, Repsol YPF joined a Shell/Eni partnership in a block of 64 contiguous outer continental shelf leases in the Beaufort Sea off Alaska’s North Slope. It was the Spanish oil and gas major’s first Alaska acquisition. Repsol picked up its 20 percent working interest from Eni, which had had a 60 percent interest in the acreage.
The exploration block, operated by Shell, was in federal waters north of the Oooguruk, Nikaitchuq, Northstar and Kuparuk units, extending east to midway above the Prudhoe Bay unit.
The partners subsequently acquired 3-D seismic with a view toward identifying future drill sites.
At the time, Repsol said “exploration activities” could start in 2009-10, but exploration has been held up by related lawsuits (see Shell story in this issue).
An integrated oil and gas company engaged in all aspects of the petroleum business, Madrid-based Repsol had 30,000 employees, operations in about 28 countries, and was one of the 10 largest private (not government-owned) petroleum companies in the world.
Repsol’s acquisitions did not stop with the Beaufort Sea partnership.
In February 2008, Repsol bid in the Chukchi Sea oil and gas lease sale held by the U.S. Minerals Management Service. In that sale Repsol bid $15.6 million on 104 blocks and was the high bidder on 93 blocks for $14.4 million.
Repsol has not said if it was looking at operating its Chukchi leases, but the company was not partnered with other bidders in the lease sale. Rumors of a potential partnership with Shell, Eni and/or Statoil have made their way to Petroleum News. None have been confirmed by any of the companies.
StatoilHydro lands offshore StatoilHydro surprised almost no one by bidding in the Chukchi lease sale in February 2008.
The Norwegian oil company calls itself the “world’s largest offshore subsea operator,” with more than 3,700 miles of pipeline and projects in 40 countries, including deepwater Gulf of Mexico, the Canadian oil sands and a long history in the North Sea.
So it seemed reasonable that Alaska’s offshore prospects would attract the company.
StatoilHydro came about from the October 2007 merger of state-run Statoil and Norsk Hydro, which both date back to the beginning of the Norwegian oil industry in 1969.
Over the course of 2007, StatoilHydro joined the Alaska Oil and Gas Association and the Resource Development Council for Alaska, and Norsk Hydro USA hired Ken Boyd, the former director of the state Division of Oil and Gas, as a local consultant.
At the February 2008 lease sale, StatoilHydro spent $14 million in high bids on 16 tracts in the Chukchi Sea. The company bid in partnership with the Italian major Eni Petroleum on all but two of those tracts, holding a 60 percent interest in the joint acreage.
“StatoilHydro sees this as an opportunity to achieve a competitive position in a new frontier basin with long-term growth potential, while also advancing the Arctic initiative,” Halvor Engebretsen, vice president for StatoilHydro’s Arctic growth theme, wrote to Petroleum News in an e-mail on Feb. 7 from his offices in Norway.
Total back in Alaska again Total E&P USA Inc. may have finally found a foothold in Alaska.
The French mega-major Total, the fourth largest integrated oil company in the world, has been involved with several different projects in Alaska over the past 10 years.
Through previous incarnations of the company, Total came to Alaska nearly a decade ago as a partner in the BP-operated Badami field, but dropped its interest in early 2002.
Over the following years, the company maintained an interest in outer continental shelf leases in the Beaufort Sea and onshore prospects across the central North Slope.
Total picked up 20 tracts in a 2002 federal lease sale in the National Petroleum Reserve-Alaska, and in early 2004 drilled Caribou 26-11, a frontier exploration well about 60 miles northwest of Umiat and 45 miles west of the village of Nuiqsut.
The well results prompted Total to drop most of its NPR-A acreage.
But Total returned to Alaska a few years later, picking up 32 tracts north of Point Thomson in an April 2007 federal lease sale in the Beaufort Sea.
In March 2008, Total bought a 30 percent interest in the Chevron-operated White Hills prospect around 25 miles southwest of the Prudhoe Bay unit.
Today, Total maintains an interest in around 145,000 state acres.
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