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April 2007

Vol. 12, No. 15 Week of April 15, 2007

Eni formally announces Nikaitchuq takeover

Kay Cashman

Petroleum News

Eni formally announced its acquisition of Kerr-McGee’s 70 percent interest in the Nikaitchuq prospect on April 11, giving the U.S. subsidiary of Italy’s largest oil and gas company 100 percent working interest in the Alaska North Slope offshore oil field.

The news first broke in the Feb. 25 issue of Petroleum News, which quoted inside sources and State of Alaska oil and gas lease records that showed an assignment of 20 leases in the Nikaitchuq unit and adjacent Tuvaaq unit from Kerr-McGee to Eni was approved Feb. 14. Percentages varied but in each case 100 percent of Kerr-McGee’s interest was bought out by Eni. (Kerr-McGee was acquired by Anadarko Petroleum in 2006.)

If Nikaitchuq is formally sanctioned, it will be the first development operated by Eni in Alaska, with a total investment of about $900 million in U.S. dollars, the Milan-based major said.

“Successful appraisal drilling has been completed, confirming the potential viability of the development project,” Eni said in its release. “Plans for a phased development are currently being evaluated with the target of sanctioning the project by year end, and first oil to flow by the end of 2009.”

About 80 wells

Eni said the completed project would have about 80 wells, 32 of which would be drilled from onshore (Oliktok Point pad) and the remaining drilled from an offshore artificial island. That’s 12 more wells than initially planned from onshore, which suggests extended-reach drilling in the prospect over the last three years has been successful. About half the 80 wells would be injectors and half producers.

The wells will “be tied back to a production facility located at Oliktok Point to reach a production of 40,000 barrels per day,” Eni said, which is 20,000 barrels less than the peak production Kerr-McGee had been talking.

Kerr-McGee’s permit filings called for as many as three offshore pads with 50 wells each, plus the 20 onshore wells, which may or may not explain the difference in barrels per day quoted by Eni and Kerr-McGee.

The U.S. Army Corps of Engineers development permit, POA-2005, 1243, secured by Kerr-McGee for the project, included a pad onshore at Oliktok Point, which would hold 20 wells, and then as many as three production islands, which would each have about 50 wells.

Deal with ConocoPhillips?

Under Kerr-McGee’s plan, production from the Oliktok Point pad (phase one) would initially be processed at the nearby Kuparuk River unit facilities. In its press release Eni did not say whether that was still part of its plan. But a Petroleum News source says Eni is talking to ConocoPhillips about sending all produced crude from Nikaitchuq through Kuparuk vs. building a standalone processing facility at Oliktok Point. One state official, who asked not to be identified, said using the Kuparuk facilities would make the most sense because production at the Kuparuk unit went online in 1981 and the unit “has room to process a lot more oil.”

If Eni does build its own standalone processing facility for Nikaitchuq, it will be the first independent-operated production facility on the North Slope.

Production from independent Pioneer Natural Resources’ nearby Oooguruk field, also in the shallow waters of the Beaufort Sea, is expected to come online a year ahead of Nikaitchuq, but all its hydrocarbons will be processed at Kuparuk.

Eni has been in Alaska since August 2005, following the acquisition of 103 North Slope leases from Armstrong Oil & Gas. Since then, Eni’s portfolio in the region has grown to 151 leases.

Nikaitchuq was one of the prospects identified by Armstrong, which brought Kerr-McGee to Alaska as a majority partner in late 2004 in Nikaitchuq (and Tuvaaq) to explore the acreage.

Kerr-McGee said in 2006 that Nikaitchuq’s gross estimated resource range was 100 million to 200 million barrels of oil equivalent.






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