Exploration moves

State of Alaska asks for comments on two exploration license proposals

Eric Lidji

Petroleum News

The state released information on April 14 about the two companies asking to explore two different underdeveloped basins, one in Southcentral Alaska and another in the Interior.

BGI North America LLC is requesting an oil and gas exploration license covering around 72,443 acres in the Crooked Creek-Circle basin, east of the community of Central and south of the community of Circle.

LAPP Resources Inc. is requesting a natural gas exploration license covering around 21,080 acres near Houston and Willow, north and east of the Parks Highway.

The state Division of Oil and Gas received both proposals last April, and requested competing proposals this past December. Having received none, the proposals will now both go out for public comment, which the state will accept through June 13.

Yukon, if you try

Specializing in seismic activities, BGI focuses on overlooked or underdeveloped oil regions around the country and often partners with more experienced operators during the production phase of projects, according to staff geologist Jesse Crews.

“What we try to bring is a level of geologic expertise,” Crews told Petroleum News. “If we can, we try not to be too intimately involved on the operations side.”

The Crooked Creek basin would be the first exploration venture in Alaska for the company, which maintains operations in Illinois, Oklahoma and New Mexico and is working toward a new project in Arizona. The company claims to manage 5 million barrels of oil equivalent in proven reserves.

While BGI holds a current business license in Alaska, the company has no existing land holdings in the state. A trip to the subarctic would be a new and risky experience.

“This would be higher risk than the things that we’ve done in the past,” Crews said. “Of course if there’s higher risk, there’s higher reward.”

Like LAPP Resources, BGI is also requesting a 10-year license and proposing a minimum work commitment of $500,000 to explore for oil in the acreage around Crooked Creek.

In a look at the resource potential of the Yukon Flats back in 2004, the U.S. Geological Survey estimated the Crooked Creek area could contain 160 billion cubic feet of technically recoverable natural gas and 6.47 million barrels of technically recoverable oil.

But although the basin is considered gas prone, BGI plans to look for oil, intrigued by the possibility that structures to the east extend beneath Crooked Creek, and motivated by the knowledge that rising oil prices improve the economics of any project.

“If there’s gas there, that’s fine too, but it would be better if there was oil there,” Crews said.

If the company gets the exploration license, it plans to run several lines of seismic, refine the gravity work and try to pin down whether that eastern structure continues into Crooked Creek basin.

The proposed exploration area is just south of land owned by Doyon Ltd. and near the area being considered for a land swap between Doyon and the U.S. Department of Fish and Wildlife.

Legacy project in Houston

Work to develop these resources dates back more than 50 years, according Jack Roderick’s history of oil and gas development in Alaska, “Crude Dreams.”

In the mid-1950s, Anchorage Gas and Oil Development Co. Inc. drilled several exploration wells in the area after the U.S. Bureau of Mines discovered methane gas there, but the company suspended all the wells before the end of the decade.

Now, LAPP Resources is requesting a 10-year license and proposing a minimum work commitment of $500,000 to explore the Houston basin.

But the company isn’t new to the area by any means.

LAPP Resources is an Anchorage exploration company owned by David Lappi, a longtime Alaskan and advocate for coalbed methane and shallow gas development in the state, as well as a leaseholder and energy entrepreneur.

“The goal is to find and produce hydrocarbons,” Lappi said. “I don’t think we have any particular idea about what might be there.”

Lappi has been trying to develop the resources for nearly 20 years, first examining the shallow gas and coalbed methane possibilities of the area in 1991, when he returned to Alaska after a decade-long stint in western Australia.

For the next 10 years, Lappi took part in early efforts to extract natural gas trapped in seams of underground coal near Houston, first by acquiring state leases in the area in 1993 and then by drilling five exploration wells in the area between 1998 and 2000.

Declining gas production in the Cook Inlet motivated the company to start looking again at Houston. Lappi said his company believes there is “plenty of gas in the basin” but that not enough exploration has been done to prove that hunch.

A rarely used exploration option

The state began the program in the early 1990s, but has only issued five licenses in that time, including one to a company that declined to accept it.

The license can run for up to 10 years, but the four current licenses are on five or seven-year timeframes.

As the license approaches expiration, the holder can request to convert it into a lease, as was the case recently with a portion of the license held by Forest Oil and Anschutz Exploration in the Copper River basin near Glennallen.

While the state gathers public comments on the two new exploration proposals, it will also begin work on a “best interest finding” to determine whether or not the state will benefit by issuing the licenses.

That finding will be put out to another round of public comments at some point in the future before the state issues the licenses.