Providing coverage of Alaska and northern Canada's oil and gas industry
August 2018

Vol. 23, No.33 Week of August 19, 2018

Eni, Caelus, Oxy, Exxon, Oil Search Alaska news, rumors; BP’s Dawn Patience retires

Kay Cashman

Petroleum News

The hottest rumors barely being circulated in Alaska, in order are: 1. mega-major Eni has acquired Caelus Alaska Exploration’s eastern North Slope leases; 2. Eni has acquired Caelus’ Oooguruk leases and will take over operatorship of that unit; 3. Eni has bought Caelus Alaska, including all of its Smith Bay acreage.

Eni’s official response to these three rumors as of Aug. 16: “no and we have no further comments,” per Whitney Grande, vice president of safety, environment and quality out of Houston.

Per Caelus’ website it has a 350,000-acre position in the “highly prospective trend” between Prudhoe Bay and Point Thompson. Shortly after acquiring the leases in 2015 (see adjacent map), which are in two blocks, Caelus acquired 175 square miles of new 3-D seismic data and reprocessed another 275 square miles of existing 3-D to image prospects on the acreage.

“Adjacent infrastructure with available capacity reduces threshold volumes required for developing discoveries in the sub-100 MMBO recoverable range,” Caelus said. “Multiple play types within proven stratigraphic horizons provide significant upside potential in previously poorly-imaged structural trends and/or subtle stratigraphic traps.”

Surrounding legacy wells drilled in the 1960s through 1990s “confirm deeper petroleum system elements and de-risked shallower Brookian reservoirs and hydrocarbon charge and phase within the area,” Caelus said, much of which has been previously reported in Petroleum News.

As for the rumor about Eni buying Caelus out of the Oooguruk oil field, that makes sense given the location of the Eni-operated Nikaitchuq unit next door, as well as Eni’s plan to resume oil drilling at Nikaitchuq and indications of positive results from the company’s Nikaitchuq North wildcat well.

The rumor is also supported by Eni CEO Claudio Descalzi saying at a recent 2018-21 strategy meeting that the company is “doing well” in Alaska and has plans for “increased investment” in the state (see Oil Patch Insider, April 22 issue of PN).

Still, as reported in PN’s May 27 Oil Patch Insider, ConocoPhillips is also a likely candidate for acquiring Oooguruk from Caelus given its aggressive actions on development of the Nanushuk oil discoveries in the area and west into the National Petroleum Reserve-Alaska.

The information was not officially confirmed by Eni or Conoco, but a few months ago a PN source at Caelus said the independent was looking to sell some of its North Slope interests.

The third and weakest rumor has been reported to PN by only one person.

The truth (or conjecture) of all three rumors will be evident in time.


Oxy re-entering Alaska rumors solidifying

Rumors that Occidental Petroleum is taking another look at Alaska - likely with another major oil company(s) that is already active here - are solidifying. No one who contacted Petroleum News since it first reported Oxy might be taking a hard look at Alaska in the Aug. 5 issue was willing to go on record and confirm it or name Oxy’s partner(s), but since ExxonMobil (see next brief) “demonstrated an increased appetite for risk with bids on remote blocks,” in the Aug. 15 U.S. Gulf of Mexico Lease Sale 251, PN’s guess is Exxon.

Oxy is an American multinational petroleum and natural gas exploration and production company headquartered in Houston, Texas, that used to be involved in Alaska as a minority owner of the North Slope Milne Point oil field.

The rumor that Oxy was coming back gained momentum when the state of Alaska announced its upcoming Special Alaska Lease Sale Areas, or SALSA, which will be part of the fall areawide oil and gas lease sales - specifically 23,040 acres at Gwydyr Bay on the central North Slope coast between Milne Point and Northstar (see July 29 PN article “Bids on Blocks”).

In 1975, Mobil Oil, predecessor to ExxonMobil, announced a new oil discovery at the Gwydyr Bay South No. 1 wildcat well on a lease (ADL47468) owned 50-50 with Standard Oil of California, which later became Union Oil, then Unocal, and now is part of Chevron.

Per Mobil’s press release, oil flowed at a test rate of 2,300 barrels per day from the Sadlerochit formation.

That lease was never developed, but today is still held by Exxon and Chevron.

Again, unless a separate deal is announced earlier, Oxy’s level of interest in Alaska and its partner(s) should be revealed at the state’s oil and gas lease sales this fall.


Exxon bids on remote, more risky leases

Following the U.S. Gulf of Mexico Lease Sale 251 on Aug. 15, Wood Mackenzie senior research analyst William Turner reported that ExxonMobil “demonstrated an increased appetite for risk with bids on remote blocks,” surmising, among other things, that this was due to an increase in crude oil prices and a better ROI, or rate of return, on such investments.

The lease sale attracted 171 bids from 29 participating companies, with high bids totaling $178.1 million, an increase of about $53 million (43 percent) from the last region wide lease sale in March indicating “capital is returning to the Gulf of Mexico,” Turner said.

“Roughly 40 percent of blocks this round made a return from lease sales in 2007 and 2008, including a sizable portion of blocks towards the east picked up by ExxonMobil, previously held by Shell.”

Shell hangs onto Alaska leases

Speaking of Shell, given its top executive’s aversion to offshore oil and gas development, Shell continues to hold a 50 percent interest in the Beaufort OCS leases it shared with Eni and a 100 percent interest in state leases in western Harrison Bay, per Brit Lively of Mapmakers Alaska.

Could be the mega-major is tired of dropping leases in Alaska where others such as Armstrong and Repsol have since made sizable oil discoveries.

Although Eni has not yet announced results for its winter offshore Nikaitchuq North wildcat that involves a Harrison Bay lease half-owned by Shell, the company’s CEO Claudio Descalzi recently Eni was “doing well” in Alaska and has plans for “increased investment.”

Go figure.

Note: Wood Mackenzie, a Verisk Analytics business, is well-known source of commercial intelligence for the world's natural resources sector.


Oil Search using two rigs this winter on North Slope

Not much has changed at Oil Search since Petroleum News’ report in its July 22 issue, although a walk into the big independent’s expanding offices in downtown Anchorage shows 50 people, most with North Slope experience, busy at work in a space that is designed to eventually hold an Alaska staff 120.

The company’s top Alaska executive, Keiran Wulff, told PN in an Aug. 15 email, “We are about to commit to a contract with an international seismic processing company to reprocess a majority of available data to a common product. This will take a number of months to complete,” and is part of the company’s process of selecting precise well locations for the upcoming winter drilling season on the North Slope.

Wulff said Oil Search is “looking to use two rigs” and is in “discussions with stakeholders to commence the approval processes required.”

The ASX-listed independent Oil Search Ltd. operates one of the largest North Slope oil discoveries in decades in the Pikka/Horseshoe oil prospect west of the central North Slope.

The company acquired its interest from Armstrong Energy and its minority partner in October 2017. The other major partner in the development and surrounding exploration acreage is Repsol, a partner with Oil Search and ExxonMobil in Papua New Guinea.

Oil Search took over operatorship of the giant Nanushuk oil discovery from Armstrong. Pikka/Horseshoe area had previously been drilled through but ignored by Alaska majors until Denver independent Armstrong came along, forcing a rethink of North Slope oil potential.


BP’s Dawn Patience retires

Dawn Patience, head of BP Alaska’s press office, retired this month.

Prior to 11 years at BP, Patience was director of communications at ConocoPhillips Alaska.

Her LinkedIn page says Patience is self-employed in the Anchorage area, describing her as “a professional communications counselor with 25 years of expertise in public affairs, media communications and crisis response,” specializing in “oil and gas operations.”

In a message to Petroleum News, Patience said, “I’m an aspiring retiree and working hard at it.”

In an Aug. 15 email she said she was “strictly working on retirement, biking, fishing and becoming a ski bum for the foreseeable future. No company affiliations to mention.”

@Alaskagreatlife are her Instagram and Twitter accounts.

Dawn, best wishes from Petroleum News. You will be missed.


Alyeska says Ballot Measure 1 threatens TAPS, environment

Tom Barrett, president of Alyeska Pipeline Service Co., sent Petroleum News and other media outlets an editorial on Aug. 15 saying the Stand for Salmon movement represented by Ballot Measure 1 threatens both the Trans Alaska Pipeline System, or TAPS, and Alaska’s environment.

He contends that while the salmon movement promises vital infrastructure will continue to move forward if Ballot Measure 1 passes, in reality, “the initiative becoming law would bring a standstill to actions that protect” TAPS today, while putting fish habitat around it in more jeopardy.

Alyeska operates the 40-plus year-old oil pipeline and maintains its 800-mile route across more than 700 fish streams from the North Slope to Valdez.

“I know our personnel, almost all Alaskans, along with our Alaska-based industry partners, tribal organizations, and state and federal agencies that regulate our work, share Ballot Measure 1’s supporters’ appreciation for Alaska’s special waterways and vibrant marine life. But that’s where common ground ends,” Barrett said.

Many states have lost salmon species or declared them endangered due to overfishing and blocked migration routes, he said. “Not so in Alaska, and certainly not along TAPS. We regularly clear, repair, and modify streams to maintain fish passage and prevent erosion.”

Many of Alyeska’s team members “hold master’s degrees in Fisheries, Marine Biology, Wildlife Biology, Environmental Science and Engineering,” Barrett said.

“They know these waters, and the more than 30 fish species inhabiting them, from daily and annual surveillance and from constantly anticipating and responding to the forces of nature and Alaska’s often harsh and unpredictable weather.”

Heavily regulated, TAPS complies with the requirements of more than 20 state and federal agencies, he said, noting since 2000, Alyeska has “received more than 700 individual permits for routine maintenance activities, new installations, and projects along waterways to safeguard pipeline integrity and protect the environment,” plus holds 80 to 90 active annual permits for work in fish habitat areas.

“The fish habitat initiative puts at risk timely permitting and conduct of our actions. With rigid new agency review requirements and permitting criteria, and a wide-open appeals process, the initiative would complicate and delay inspection and certain maintenance activities, and create uncertainty about what is considered minor routine maintenance and grandfathered projects. Simple but important projects would face convoluted if not unpassable hurdles. And when we confront natural disasters, such as floods, fires and earthquakes, there’s no time to waste.”

Barrett cited an example that could prove devastating to fish habitat if ballot 1 is adopted:

“Every spring, the Sagavanirktok River - better known as the Sag River - floods along the Dalton Highway and TAPS right of way for long stretches. Sometimes the flooding is annoying. Sometimes it’s troublesome. In spring 2015, it was disastrous. By spring’s arrival, ice buildup was 12 feet high in some places. Record-high temperatures led to swift snow melt and record river flow. Suddenly, the Sag flooded miles of the North Slope and endangered two of Alaska’s critical economic lifelines: TAPS and the Dalton Highway.

“TAPS personnel saw it coming. The Dalton was eventually closed, but because of very rapid preventative actions along waterways near TAPS, the pipeline and the fragile environment around it was spared catastrophic damage, and the pipeline stayed in operation. Over the weeks and months that followed, we conducted a massive cleanup, dozens of inspections, many repairs, and wide-ranging restoration of waterways and fish passages impacted by the flooding.”

Under the salmon initiative even as amended, Barrett said the permits needed to rapidly accomplish critical work would be more difficult to obtain, as would permits for spur dikes that redirected the Sag River’s main channel.

“TAPS, the Dalton Highway, fish streams and waterways could suffer devastating consequences,” he said.

Note: Barrett is a retired U.S. Coast Guard vice admiral and former deputy secretary of the US Transportation Department.


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