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The Explorers 2008: Eni becomes an oil producer in 2008 Italian major holds interest in Oooguruk, working to bring Nikaitchuq online, exploration on deck Eric Lidji Petroleum News
Eni Petroleum shifted its focus in Alaska from exploration to development this past year.
The American subsidiary of the Italian multinational sanctioned development of the Nikaitchuq unit in the Beaufort Sea in late January, and got its first production base in Alaska through an interest in the neighboring Oooguruk unit, which came online in June.
Meanwhile, the company expanded its lease holdings in Alaska during the record breaking Chukchi Sea lease sale held by the federal government in early February.
Eni also maintains a group of federal leases in the Beaufort Sea held jointly with Shell and Repsol, as well as the Rock Flour exploration unit and the Maggoire prospect in the central North Slope. The company holds around 233,000 gross state acres.
Newcomer with long history Through its subsidiary Agip Petroleum, Eni first picked up leases in Alaska in the late 1960s, and operated on the Kenai Peninsula through “outsourcing agreements” signed with American oil companies in the late 1970s.
But the recent history of Eni in Alaska started in August 2005, when the company acquired the North Slope holdings of Armstrong Alaska. The companies soon asked the state to form the Rock Flour unit, tucked between the Prudhoe Bay and Kuparuk River units.
As the unit operator, Eni planned to target viscous crude oil from several reservoirs.
Previous exploration work in the area showed oil-bearing sands. Eni planned to test whether higher temperatures in the area would make the sluggish oil easier to produce.
In a plan of exploration approved toward the end of 2005, Eni offered deadlines for three wells and a seismic program by summer 2010. The company permitted four wells the following year, three in the Rock Flour unit and to the south in the Maggiore prospect.
That winter, Eni drilled the Rock Flour No. 2 well along the northern border of the unit, the Rock Flour No. 3 well in the south, and Maggiore No. 1.
Bringing Nikaitchuq online The busy season fulfilled Eni’s commitments at Rock Flour through June 2009, allowing the company to direct more immediate energy to its prospects farther to the north.
Over the course of 2007, Eni worked to increase the attractiveness of the Nikaitchuq unit, succeeding in areas attempted by previous unit operator Kerr-McGee.
In the spring and early summer, Eni got the state to more than double the size of the unit by co-opting leases from the Tuvaaq unit to the west, and un-unitized leases to the south.
Toward the end of the year, the state modified the royalty requirements on 12 of the 18 leases at the expanded Nikaitchuq unit, setting up a structure where Eni paid lower royalties to the state when the price of oil dropped below a certain threshold.
The state rejected a similar request from Kerr-McGee a few years earlier.
The royalty modification prompted Eni to sanction a $1.45 billion development plan at Nikaitchuq in late January 2008. The plan called for drilling between 70 and 80 wells from an onshore pad at Oliktok Point and an artificial gravel island near Spy Island.
Using a new subsea pipeline, Eni would tie the offshore pad to a new processing facility at Oliktok Point capable of treating up to 40,000 barrels per day — the first North Slope processing facility not operated by one of the owners of the trans-Alaska oil pipeline.
Developing both heavy oil from the shallower Schrader Bluff formation and light oil from the deeper Sag River formation, Eni expects to bring Nikaitchuq online by the end of 2009. The company estimates recoverable reserves at around 180 million barrels of oil.
Eni received Alaska Oil and Gas Conservation Commission drilling permits for its first development and service well at Nikaitchuq in late August and early September.
Summer seismic continues As Eni works to bring Nikaitchuq online, the company is broadening its reach in Alaska.
During a sale in February, the company picked up 18 federal leases in the Chukchi Sea, including 14 as the minority interest owner in a partnership with StatoilHydro. Eni was outbid on nearly 60 tracts in the highly prospective region.
Eni shot a joint seismic program this summer with Shell and the Spanish oil company Repsol over a swatch of shared federal leases in Harrison Bay. The company also planned its own summer seismic program over the Nikaitchuq unit.
In June, Eni saw first production from the offshore Oooguruk unit. Eni maintains a 30 percent working interest in the unit, which is operated by Pioneer Natural Resources.
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