Providing coverage of Alaska and northern Canada's oil and gas industry
October 2010

Vol. 15, No. 40 Week of October 03, 2010

Road drives Umiat plans

Renaissance asks BLM to include Umiat road, project in upcoming NPR-A IAP

Eric Lidji

For Petroleum News

Renaissance Alaska believes modern technology can overcome almost all of the obstacles facing development of the Umiat prospect in the foothills of Alaska’s Brooks Range.

But for one large obstacle, the company is depending on ancient technology.

Umiat is one of the oldest known oil fields in Alaska, but remains undeveloped 65 years after its discovery because of permafrost, low reservoir pressure and remoteness. The prospect dates back to U.S. Geological Survey and U.S. Navy wells from the 1940s.

Renaissance Alaska, a Houston-based independent that operates under the subsidiary Renaissance Umiat, believes technology like multilateral horizontal drilling, electric submersible pumps and cold gas injection can handle the permafrost and pressure.

Road needed

For the remoteness, though, the company needs a road.

The state agrees and is wrapping up a second season of fieldwork on a potential road connecting the Dalton Highway to an airstrip at Umiat, along the Colville River.

Renaissance believes the state and federal governments can promote the development of Umiat — estimated to hold 250 million barrels of oil — over the next few years by taking the project into consideration as they craft new plans and studies in the region.

The U.S. Bureau of Land Management is concluding a scoping session for a new integrated activity plan for the National Petroleum Reserve-Alaska. At a Sept. 23 hearing, Mark Landt, executive vice president of land and administration for Renaissance, asked the federal agency to include an Umiat development scenario, along with accompanying transportation and infrastructure projects, in the plan as a way to avoid duplication.

Four Umiat leases

Renaissance holds four Umiat leases, two state and two federal. Because of a 3-D seismic shoot Renaissance undertook in 2008, BLM extended one of those leases until 2019. The other federal lease expires in 2012, but Landt said it is also eligible for extension. The two state leases don’t expire until Jan. 31, 2014, and Jan. 31, 2016, respectively.

Renaissance still holds four federal drilling permits approved in early 2008. The BLM has extended those until 2010. That may not be long enough, but Landt said the permit comes with a relatively quick turnaround, usually less than 60 days.

As early as the winter of 2011-12, Renaissance plans to drill a shallow well at Umiat to test the deliverability of the field, currently estimated at about 50,000 barrels per day.

Renaissance arrived in Alaska in 2006, building up land positions both on the North Slope and in the Cook Inlet basin. In late 2009, Renaissance transferred its Cook Inlet acreage to a sister company called Stellar Oil and Gas as a way to focus fundraising and this past March the companies sold their Cook Inlet holdings to the Australian company Buccaneer Resources. Now the Renaissance-Stellar team runs Buccaneer Alaska, the local subsidiary overseeing exploration, through a service contract. Through all that shuffling, though, Renaissance kept 19,348 acres of state and federal leases at Umiat.

Studying a $357 million road

Renaissance got a boost earlier this year when the state got $8 million for environmental studies on the Foothills West Transportation Access project, a road connecting the Dalton Highway to Umiat to increase access to remote resource sites in Western Alaska.

That road would create road access to Umiat, the Gubik Complex currently being explored by Anadarko Petroleum and partners, and other foothills oil and gas prospects.

After ranking five possible corridors based on nine weighted categories, the Alaska Department of Transportation and Public Facilities is now focusing on one route in particular. Known as the Galbraith Route, it runs 102 miles from milepost 278 of the Dalton Highway to the Umiat airstrip. The route would be the cheapest and easiest to build, and present the fewest environmental concerns of the five options, but would cross the most subsistence areas and would fall in the middle of the five on maintenance costs.

The other routes are a Galbraith West alternative and three routes starting farther north on the haul road: from Franklin Bluffs, Pump Station 2 and Pump Station 3 respectively.

The Galbraith Route would cost some $357 million to build and almost $2.4 million each year to maintain, according to current estimates, and would also require two maintenance camps costing $20 million to $30 million to build and some $700,000 annually to maintain. One-third of the construction costs, or $113 million, would go toward bridges over the Itkillik, the Anaktuvuk, the Chandler and the Colville Rivers.

This summer, the state began narrowing down the six-mile-wide Galbraith corridor.

Which is most resourceful?

A more complicated measurement is how well the route would serve the stated mission of the road: to increase access to resource plays in the foothills of the Brooks Range.

A 25-mile buffer around the proposed Galbraith Route would include 108 leases totaling 477,402 acres. In similar measurements taken of the other four possible routes, two would include more leases and three would include a larger lease acreage area.

To quantify the value of that leased acreage, though, the state measured each route against the U.S. Geological Survey’s 2005 assessment of the Central North Slope and found that only the two routes — Galbraith and Galbraith West — promised “high” potential for new discoveries, with the other routes ranked as “moderate” or “low.”

Galbraith and Galbraith West would also present the shortest driving distances from Fairbanks, the Interior Alaska hub where many overland cargo trips would begin.

That said, though, while the oil or natural gas resource in the ground remains unchanged over time, though better understood, the lease ownerships on the surface do not. The report measures lease holdings from 2009, but in recent months many of those lease holders, including Anadarko, Chevron and FEX, have relinquished significant acreage.

A road, however, could make that remote land more attractive in future lease sales.

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