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Providing coverage of Alaska and northern Canada's oil and gas industry
June 2014

Vol. 19, No. 25 Week of June 22, 2014

Cosmopolitan has intrigued for decades

BlueCrest is the sixth company to pursue the offshore field in the southern Kenai Peninsula, but is building on previous failures

Eric Lidji

For Petroleum News

With plans to drill this summer, BlueCrest Energy Inc. is now the sixth company in the past five decades to take a run at the offshore Cosmopolitan field in the Cook Inlet basin.

But the privately held Fort Worth, Texas-based independent hopes to succeed where its five predecessors have failed at the oil and gas field off the coast of Anchor Point in the southern Kenai Peninsula by combining two previous development proposals.

Pennzoil discovered Cosmopolitan in 1967.

Using a jack-up rig, Pennzoil first drilled the 12,112-foot vertical Starichkof State No. 1 discovery well, on the present-day ADL 384403. The well encountered 30 barrels of 20-degree API gravity oil from a drill stem test at about 6,900 feet and 21 barrels from a drill stem test at about 6,800 feet, but found the deeper Hemlock formation to be wet.

The down-dip Starichkof State Unit No. 1 well, located to the north of the discovery well on present-day ADL 391903, collected full cores in the upper Tyonek and Starichkof sands. An evaluation found good sand quality and some gas, but no production potential.

The region lay fallow until the 1990s, when ARCO Alaska began a second exploration effort at Cosmopolitan. Phillips Inc. continued the effort after acquiring ARCO’s Alaska properties.

In 2001, Phillips formed the Cosmopolitan unit from seven state leases and two federal leases. Using an onshore pad, Phillips drilled the Hansen No. 1 well directionally to an offshore target some 2.5 miles away. The well confirmed the presence of oil in the Starichkof sands, but also discovered productive sands in the deeper Hemlock formation.

After a merger, ConocoPhillips Alaska Inc. assumed operatorship of the prospect.

In 2003, ConocoPhillips drilled Hansen No. 1A, a sidetrack of the original well. The sidetrack provided a deviated penetration into the Starichkof and a lateral penetration into the Hemlock. A flow test produced 1,000 barrels of oil per day and 14,851 barrels cumulatively. The oil was sweet and of medium gravity, between 24 and 27 API.

A second plan of exploration required either seismic or a delineation well. But based upon the results of the sidetrack, overriding royalty owner Briggs Nesmith asked the state to require ConocoPhillips to develop the prospect. In a letter to the Division of Oil and Gas, he wrote, “Even with $4 per barrel trucking cost, the well is far more than economical.” Then-Director Mark Myers disagreed. “I believe the additional reservoir delineation work planned for the next two years is necessary,” Myers responded.

Pioneer gets interested

Pioneer Natural Resources Alaska Inc. joined ConocoPhillips on a seismic program at Cosmopolitan in 2005. At the time, Pioneer was relatively new to Alaska and eager to accumulate exploration opportunities. Pioneer and ConocoPhillips also partnered on some pioneering wildcat exploration wells in the National Petroleum Reserve-Alaska.

In 2005, the partners shot 40 square miles of 3-D seismic. The companies provided little information at the time, but the seismic program apparently “provided a clear view of the perimeter flanks of an anticlinal structure, but the crestal view of the structure was obscured by a gas cloud, rendering a conclusive description of the reservoir structure unobtainable at the time,” according to recent filings BlueCrest submitted to the state.

After the joint seismic program, Pioneer Natural Resources acquired the remaining working interest at Cosmopolitan and became the operator of the exploration program.

Around that time, Pioneer Natural Resources Alaska President Ken Sheffield offered a resource potential of 30 million to 100 million barrels of oil for the Cosmopolitan field. He also said that a development would require “some pretty significant infrastructure,” because the field is “about 65 miles from the existing Tesoro refinery on the Kenai Peninsula.”

In 2007, Pioneer plugged the original Starichkof and Hemlock completions on the Hansen No. 1A sidetrack and drilled Hansen No. 1A-L1, another sidetrack off the original Hansen well. The “long-reach undulating lateral well” ran through the upper portion of the Starichkof 8 sub-interval of the sands and tested a 300 barrels per day.

Pioneer slowed some of its investments in response to the financial crisis, but returned to Cosmopolitan in 2010 to fracture stimulate the interval from Hansen No. 1A-L1. An extended flow-test produced 250 barrels per day and more than 33,000 barrels, cumulatively, which the company trucked to the Tesoro refinery under a pilot program.

The results convinced Pioneer to propose a development program for Cosmopolitan, but in early 2011 the company said, “subsequent flow test results and engineering studies indicated that the resource potential was not as large as originally estimated.” As such, Pioneer terminated the unit and relinquished all but two leases, which were held by wells.

Buccaneer and BlueCrest

The move split the prospect.

Buccaneer Energy Ltd. and the privately held Fort Worth, Texas-based BlueCrest Energy acquired the two leases - ADL 18790 and ADL 384403. Under the deal, BlueCrest grabbed 75 percent working interest, while Buccaneer took 25 percent and operatorship.

Given the known prospectivity of the area, the state offered three of the relinquished leases under special terms. Apache Corp. acquired ADL 391902, ADL 391903 and ADL 391904, and proposed seismic and exploration drilling. But regulatory delays over a basin-wide seismic program prompted the company to delay its Cosmopolitan plans.

Apache ultimately sold the three leases to Buccaneer and BlueCrest in August 2013.

After reprocessing the 2005 seismic, Buccaneer and BlueCrest drilled the Cosmopolitan State No. 1 well last summer using the Endeavour jack-up rig. According to Buccaneer, the jack-up improved the economics of Cosmopolitan by keeping the companies from having to drill directionally from the onshore pad. Cosmopolitan State No. 1 found “numerous new oil and gas zones within the upper and lower Tyonek,” above the previously discovered Starichkof and Hemlock intervals, according to BlueCrest. The partners also conducted a vertical seismic profile, although the results are confidential.

Buccaneer began divesting properties earlier this year in an attempt to improve its financial condition and sold its minority stake in the prospect to BlueCrest. Now going it alone, BlueCrest intends to merge the approaches of ConocoPhillips/Pioneer and Buccaneer by drilling oil wells directionally from onshore and gas wells using the jack-up.






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