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The Explorers 2008: FEX still deliberating over Alaska Paused drilling program in 2007, running 3-D seismic this year, new CEO keep Alaska on the table Eric Lidji Petroleum News
Alaska went from being “on hold” to “on notice” to possibly “on deck” for FEX in 2008.
The subsidiary of Calgary independent Talisman Energy closed out 2007 on a mixed note. The company released promising results from several frontier wildcats in the National Petroleum Reserve-Alaska, but also suspended drilling operations in Alaska for at least two seasons while it evaluated its local prospects.
Despite five wells under its belt and some 1.5 million gross acres held in the NPR-A, Talisman worried about the cost of drilling wildcats, distance from infrastructure, short travel seasons and restricted access to federal lands. So rather than drill, Talisman sanctioned a large 3-D seismic program in Smith Bay to get a better sense of its holdings north of Teshekpuk Lake.
Over the summer of 2007, Talisman also saw changes at the top, as former BP executive John Manzoni took over the chief executive officer spot from Jim Buckee.
Manzoni quickly launched a companywide strategic review aimed at getting long-term production growth from fewer fields. That would mean an exploration strategy focused more on a few big fields rather than on numerous small satellites in maturing basins.
As a maturing basin with plenty of underexplored terrain, Alaska could have fallen on either side of that divide, but the state made the cut in May 2008 when Talisman marked Alaska as one of nine global exploration areas it would continue to explore.
“We’re considering ramping up our drilling operation again in 2009 with the anticipation of conducting onshore operations in 2010,” Richard Garrard, geoscience manager for FEX in Alaska, told Petroleum News on Oct. 16.
Garrard said FEX doesn’t have budget approval yet for the program, but hopes to start bringing back its drilling staff by the end of the first quarter of 2009.
A three-year rush in NPR-A Talisman came to Alaska in 2003, interested in the political stability of North America following backlash from a trek into Sudan.
Through FEX, the company farmed-in on NPR-A acreage held by the French major Total, and the two companies drilled Caribou 26-11 in early 2004.
Over the following two years, FEX began amassing state and federal acreage both onshore and offshore, including taking complete ownership of the tracts held with Total.
Toward the end of 2005, FEX announced a three-year drilling program.
The company drilled Aklaq No. 2 and a sidetrack in the northwest planning area of the NPR-A in early 2006, but couldn’t test the well because of bad weather. FEX returned to the region the following winter to drill Aklaqyaaq No. 1, Amaguq No. 2 and Aklaq No. 6.
In May 2007, FEX said two wells encountered more than 225 net feet of hydrocarbon-bearing sandstones. The company put the “initial estimate of contingent resources present” at 300 million to 400 million barrels net to FEX.
FEX also cited “significant follow-up potential on many similar structures on Talisman’s acreage if commercial productivity is proven,” but marked one of the three wells from the previous season as “subcommercial given current infrastructure.”
Despite the good news, FEX became cautious about pursuing another drilling season.
“Before we spend additional money on drilling and testing we need to complete our seismic data, because we want to be sure we are drilling in optimum locations,” Tim England, senior manager of exploration for Talisman, told Petroleum News in July 2007.
Talisman sanctioned a $25 million onshore 3-D seismic program in Smith Bay, the largest of its kind for the company. The results of the program, combined with previous well data, would dictate future drilling plans. As of October 2008, the company was nearly done processing the seismic and starting to interpret the data.
Access to land a big issue The largest source of frustration for FEX in Alaska is limited access to federal lands.
Lawsuits and subsequent deferrals over the 2006 NPR-A lease sale contributed to the decision to pause drilling. Although the company bid once federal agencies finally held the sale this September, it couldn’t get the access to parts of the Barrow Arch, a geologic feature associated with major North Slope oil fields such as Prudhoe Bay and Endicott.
The arch crests offshore and extends under Teshekpuk Lake, around the Smith Bay area where FEX sent seismic crews this year. Seeking to compromise on the environmentally fragile area, the federal government deferred leasing around the lake for 10 years.
Surface restrictions around Barrow could also strand FEX onshore leases near the Chukchi Sea.
“We’re trying to establish what it means for those leases,” Garrard said.
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