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February 2018

Vol. 23, No.8 Week of February 25, 2018

Western & central North Slope, Nanushuk excite investors at NAPE

Kay Cashman

Petroleum News

Although bested by the excitement of ANWR possibly opening to oil and gas exploration, the rest of Alaska’s North Slope also received some solid attention at the recent NAPE Summit in Houston.

That shouldn’t be a surprise because the western, not the eastern, North Slope holds the hottest proven exploration play in North America - the Nanushuk formation. The area is already open to exploration and development and will certainly be far less subject to lawsuits from the environmental community.

In addition to being the hottest play, the Nanushuk and Torok geologic clinothem is the largest of its type in the world.

A recent new assessment of the National Petroleum Reserve-Alaska across the Colville River to the west dramatically boosted technically recoverable undiscovered oil reserves. Conducted by the U.S. Geological Survey and based only on a re-evaluation of the resource potential of the Nanushuk and Torok - rock units associated with major recent oil discoveries in the region - USGS increased potential undiscovered NPR-A oil reserves from a few hundred thousand barrels in 2010 to 1.7-21.8 billion barrels, with a mean estimate of 8.8 billion barrels.

And all this is on top of already-discovered Nanushuk oil on the western North Slope, on both sides of the Colville River, including Armstrong’s big discovery at Pikka (1.2 billion barrels, with a 120,000 barrel-a-day development on track to produce in 2022) that is east of the Colville and ConocoPhillips’ Willow find in NPR-A (300 million barrels of recoverable oil, 100,000 bpd possible from first development in 2023) that ConocoPhillips executive Matt Fox said in November had enabled the calibration of seismic techniques to specifically search for similar prospects.

The company identified “a lot” of Willow lookalikes in the Nanushuk, per Fox - “every one of them we’ve drilled so far has had oil in it, so we’re hopeful that several of these Willow lookalikes will deliver.”

The thick sands that form the initially discovered reservoir at Pikka can be traced along a zone more than 40 miles in length, with potentially more than 10 billion barrels of oil in place. Moreover, the same geology extends for more than a hundred miles across NPR-A, with 46 prospects identified on just one seismic line, an Oil Search executive said recently.

In February 2016, before Armstrong’s Horseshoe wildcat results were in, then-Alaska Department of Natural Resources Commissioner Mark Myers said “the proven contingent oil reserve number makes the (Pikka) discovery the largest since the Alpine field, the probable contingent reserve number the largest since the Kuparuk field, and the possible contingent number makes the discovery the largest since Prudhoe.”

The NAPE Summit on Feb. 5-9 had 12,299 attendees, which was up about 1,000 from 2017. An annual event designed to be the oil and gas industry’s worldwide marketplace for the buying, selling and trading of prospects and producing properties, NAPE celebrated its 25th anniversary this year.

So, who expressed interest in the western North Slope, home of the most important trend in North Slope and U.S. exploration activities over the past three years?

Nanushuk area prospects

Long-time Alaska oil and gas investor Paul Craig, who has an interest in the three-lease South Nanushuk prospect south of Horseshoe, plus a royalty override in the northern part of the undeveloped Umiat oil field, told Petroleum News, “I left NAPE feeling very positive about Alaska and about the future of Umiat and the South Nanushuk prospect given the level of interest shown at NAPE” in the Nanushuk and Torok formations.

“Some people are preoccupied with ANWR opening … but we (the western North Slope) have the biggest clinothem in the world … with about 1 billion barrels of oil in place at Umiat.”

In Craig’s opinion, “The Lower 48 has shifted from exploration to mining projects in tight oil when they can get production costs low enough. It doesn’t have exploratory risk, but Bill Armstrong and his partners are still out there doing real exploration. That takes guts and vision. Armstrong was preceded on the North Slope by ARCO’s Robert O. Anderson at the Prudhoe Bay discovery. That’s what made America great in the first place - people who took intelligent risks.”

In the booth Craig was part of at NAPE, three entities represented Cook Inlet and North Slope opportunities - Aurora Exploration, Craig’s company Trading Bay Oil & Gas and Malamute Energy.

Aurora Exploration is operator of the Cook Inlet basin Nicolai Creek unit with half of Aurora owned by Trading Bay, and the other half by Aurora Power Resources in which Scott Pfoff is the principal owner.

The South Nanushuk prospect, owned by Zamarello Trust, Trading Bay and Paul Gardner, consists of 55-plus square miles.

Malamute operates the undeveloped Umiat oil field and was represented at the summit by Leonard Sojka and Corri Feigi, former director of Alaska’s Division of Oil & Gas.

Pfoff’s impression of NAPE was a “medium turnout” compared to previous years. “I’ve seen it worse and I’ve seen it a lot better,” he told PN.

There was nonetheless an uptick in interest in Alaska over last year, he said; both from people looking to invest and companies interested in buying and operating prospects.

“We had some really good prospects represented at our booth,” Pfoff said. “They loved the geology.”

Guitar safest investment?

Possibly one of the most risk-free North Slope investments would be the former Hemi Springs unit, adjacent the southwest side of the Prudhoe Bay unit.

The Hemi Springs unit, which terminated in 1992 under different ownership, was renamed and unitized as the Guitar unit by its current owner and operator Alliance Exploration.

Both Barry Foote and his son Derek, who heads up Alliance in Alaska and is based in Sterling, said their preference was to find a partner to come in and drill a planned exploration well with them.

When asked whether Alliance has any meetings with potential investors or buyers scheduled, Derek told PN, “We tentatively scheduled meetings for next month (March). We’ll consider almost anything … when you’re playing in Alaska where the big boys play you have to keep all avenues open.”

Derek said the Guitar unit “is the easiest North Slope play to get developed because it’s easily accessible and has an existing well on one lease.”

The operator “should be able to cut the time way down” that it takes to first oil, he said, noting it would only require 6-7 miles of ice road to drill the well Alliance has scheduled for next winter. “The staging area that BP has is right there; there’s an existing pad.”

The Guitar exploration plan said the well will penetrate to the base of the Ivishak and a lateral well will be drilled into the Kuparuk C.

The unit currently has three leases but will soon have four as the company has signed an agreement with ConocoPhillips and its partners, owner of the fourth lease, and are awaiting lease transfer by the state. The Hemi Springs State No. 1 well, drilled by ARCO in 1984 in that fourth lease, was certified as capable of producing hydrocarbons in payable quantities from the Kuparuk C. And, although Alliance’s well will target the Kuparuk C and Ivishak, oil shows have been demonstrated in the West Sak and Ugnu across the region, Division of Oil and Gas documents say.

In other division filings Alliance said the ARCO well was not drilled in the “most optimum location for Kuparuk C pay production.” That well also penetrated the Ivishak and found a thick pay section. (Ivishak is the main Prudhoe formation.)

Depending on the results from their first exploration well, Alliance may drill a second well the following year targeting a structural high in the Ivishak, bounded by a fault.

NAPE was “pretty encouraging for our play. … (We think we have) “a good chance of getting a partner,” Derek said.

“People have more interest in Alaska right now because … there’s a lot of oil left behind up here, whereas in the Lower 48 there are a lot of frack plays but not the major plays you can get on the North Slope.”

Jim White, Alaska legend

Although geologist Robert Blodgett who strongly endorses the promising Donkel-Cade Stinson project near ANWR on the Eastern North Slope is probably a close second in terms of being interesting and knowledgeable, wildcatter Jim White of Alaskan Crude takes the prize.

White, who drilled his first wildcat in Alaska in 1977, attended the NAPE summit and actively promoted Alaska’s missed opportunities in both the Cook Inlet basin and the North Slope.

White would like to see a lot of Alaskans get rich from oil operations: “I think it’s time Alaska had a cottage oil industry and its runs by Alaskans. My pet peeve - the U.S. government wanted to get Alaska more settled, wanted more people, so the deal years ago was if you proved up on your homestead you got the mineral rights to it. In 1959, the new state government had a different attitude. The state came back and hung outrageous bonding requirements on our homestead acreage if we wanted to drill for oil or gas.”

“We probably own more oil and gas mineral rights than any person or company in the state.”

White said he and his son (also Jim, but with a different middle name, so not Jim Jr.) have about 4,600 acres in the state.

NAPE attendees, he said, were a lot more receptive this year than I have seen them in a very long time.”

- KAY CASHMAN






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