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Remote basin exploration moves forward Independent Trio Petroleum plans to drill first well in Selawik basin in late 2010, permitting for both oil and gas Kay Cashman Petroleum News
A Bakersfield, Calif., independent is preparing to drill an oil and gas well next year in one of North America’s last unexplored basins — northwest Alaska’s Selawik basin, in more recent years referred to as the Kotzebue basin. The project manager for the program is long-time Alaska geologist Arlen Ehm, whose 44-year career in the state stretches from the National Petroleum Reserve-Alaska and the coastal plain of the Arctic National Wildlife refuge in the far north to Cook Inlet basin in the south.
Ehm spent several days this past summer staking four well locations in three different areas within the 2.2 million acres Trio has under lease from NANA Regional Corp., the Alaska Native regional corporation that owns the subsurface rights to the acreage.
Trio executives spent five days with Ehm in August visiting with locals, whose village corporations control large chunks of the surface of the 2.2 million acres, and with officials from NANA and the Northwest Arctic Borough. More visits and discussions are expected in 2010, specifically to the villages of Noorvik, Selawik, Buckland and Deering, he said.
“Trio’s agreement with NANA requires them to hire as many NANA shareholders as possible … and to use NANA subsidiaries and joint ventures whenever possible,” Ehm told Petroleum News in early December. “I am looking at trying to arrange to train shareholders at the roughneck school in Seward, but the company man, the toolpushers and the drillers will all have to have Arctic drilling experience.”
Archaeological surveys first The four wells staked by Ehm are as follows (see map). They are listed in the order that they are likely to be drilled, although sidetracks and second wells at each location might be drilled, depending on drilling results:
• Kuugauraq No. 1 near Melville Channel, named for NANA shareholder Billy Sheldon;
• Tigluaq No. 1, at Cape Espenberg north, named for NANA shareholder Gilbert Karmun;
• Tiñuk No. 1, at Cape Espenberg south, named for NANA shareholder Herbie Nayokpuk; and
• SiqquiÑÑa No. 1, Baldwin Peninsula, named for NANA shareholder Sigwien Savok.
Ehm said archaeological surveys on “approximately two acres surrounding each of the drill sites were conducted at the time that the wells were staked” this past summer.
Additional archaeological surveys of the “proposed staging areas, roads and airstrip areas for the Kuugauraq No. 1 well will be done early in the summer of 2010 before entry is made into the areas,” he said.
Ehm hopes to spud the first well, Kuugauraq No. 1, in December 2010.
Right now he is preparing permits, with an eye on starting to file “in a couple of months.”
He is also shopping for a drilling rig.
“We’re going to have a lot of downtime, when we can’t drill, when the rig will be idle. We’d have to pay for it, of course, even when it wasn’t working if it belonged to a drilling company, so it probably makes more sense for Trio or NANA to own the rig,” he said.
“I am leaning toward a trailer-mounted rig. It’s not as heavy as a truck-mounted rig. I am looking at one now that the engineer who did most of the engineering on Marathon’s (Cook Inlet basin) rig was present while this one was being built.”
This particular rig would be coming in from outside Alaska, but Ehm would like to see it made Arctic-ready in Alaska.
“I’d like the rig fabricated here, winterized here by people who know what they are doing,” he said.
Water source a challenge The schedule Ehm is hoping to meet would have Trio offloading the rig and all materials from a barge in Kotzebue in late August, then transferring the rig and some materials for Kuugauraq to “shallow-draft barges for shipment up the Melville Channel of the Kobuk River in September.”
The materials not needed early in the project would be kept in a yard in Kotzebue, he said.
Gravel would be barged in first, “to the north bank of the Melville Channel” where Trio would establish a staging area and wait for the ground to freeze.
“We’ll place a dry watch on the rig and materials; ideally a husband-wife team,” Ehm said.
Next would come the building of the ice road to the drill site, as well as a 4,500-to-5,000-foot airstrip to haul in people and the rest of the supplies.
One challenge Trio faces is finding a source of fresh water for drilling operations and camp use.
“The Melvin Channel is reported to freeze to bottom, so we will send someone out in February of 2010 to drill the ice and determine for sure,” he said. “Water may need to be hauled in from a lake several miles away.”
Memory logging will be used Trio plans to grind and inject the waste that comes from the wells by annular injection. Ehm said that this is “the least expensive approved method” for disposition of wastes at a remote site. “The cuttings are ground up and pumped back into the same well” they came from. The company will use memory data logging.
There are two primary methods of logging wells by wireline tools, Ehm explained. “One is to take all of the logging equipment except the downhole tools to the proposed site when everything is mobilized. Standby charges begin very early on and can exceed the cost for the logging operation itself. The logging personnel are flown in with the downhole tools,” he said.
The second method is to use memory logging, which he said “does not require a cable containing electronics. This method can be run on any cable system that is available. A sand line is a small continuous line often a part of the rig and that can reach depths of 10,000 or more feet.”
The only equipment that is brought to the site when memory logging begins is “downhole tools along with the logging personnel. I have used memory logging when a twin well was drilled to one that had used the conventional logging methods a number of years earlier and the results were nearly identical. The costs were vastly different,” Ehm noted.
Finally, the well will be tested for oil and gas “if warranted,” he said.
Drilling of the first well and a possible sidetrack will likely be finished in March, “at the latest April” 2011.
Only two wells in basin to date The Cenozoic Kotzebue basin, which is about 80 miles wide and 350 miles long, lies just south of the Arctic Circle adjacent on the west to the offshore Hope basin. Government geologists consider the region primarily gas-prone, although they have not ruled out the possibility of oil deposits — and neither does Ehm, who is permitting to drill for both oil and gas.
Conventional oil and gas exploration to date in the Kotzebue basin includes only one 1,500-mile 2-D seismic program and two conventional wells — all by Standard Oil of California, or Socal, predecessor to Chevron, which began exploring the region with the seismic shoot in 1973.
Using what it learned from that seismic, in 1974 the company drilled the Nimiuk Point No. 1 well to a total depth of 6,311 feet, but found no oil or natural gas. However, the well’s mud log did show small amounts of methane at several depths.
Methane, or CH4, is the major constituent of natural gas (about 75 to 99 percent), and is an important source of hydrogen and a wide variety of organic compounds.
In 1975 Socal drilled a second well in the Kotzebue basin, the Cape Espenberg No. 1, to a total depth of 8,373 feet. Again, although no oil or natural gas was found, the mud log showed small amounts of methane.
Combinations of methane (64 to 97 percent), nitrogen (1 to 26 percent), oxygen (less than 1 percent to 6 percent), carbon dioxide (2 to 17 percent) and trace amounts of ethane and higher alkanes were encountered in three seismic holes that were drilled in Socal’s 1973 shoot.
Socal held onto its Kotzebue basin leases until 1992, its data the property of NANA and available to Trio under its agreement with the Native regional corporation.
Crude oil seeps have also been reported in the Kotzebue basin by locals, but none have been confirmed by government geologists on their few excursions into this remote area of Alaska which, unlike the central North Slope, is not connected by a road to the rest of the state.
A U.S. Geological Survey report also refers to a hole drilled in 1949-50 at the community of Kotzebue to test for fresh water that discovered gas “under high pressure in Quaternary deposits at 238 feet.” The gas reportedly “lifted the heavy string of drilling tools several feet into the air, showered the area with mud, and continued to flow at decreasing pressure for more than 24 hours.”
A major zinc mine in the region, Red Dog, which sits on land owned by NANA, is currently testing the properties of shale gas formations in the region.
Resources unknown How much natural gas and oil does Trio expect to find?
Ehm wouldn’t commit to specific numbers.
But in a February interview with Petroleum News, Trio Chairman Stan Eschner, a geologist, was enthusiastic about the potential of the undeveloped Kotzebue basin.
“There’s good analog in Cook Inlet … a thick tertiary section … a lot of sequences of coal, sand and shale. … The natural gas could be on the order of trillions of cubic feet — several trillion,” he said.
He also said that he believes the basin has “very significant” oil potential.
“On the seismic we’ve seen a lot of sizeable structures that have never been drilled … big fat anticlines that have never had a well on them.”
But neither Eschner nor Trio’s other top executive, Vice President Steve Rowlee, was willing to comment on the amount of oil and gas that might be commercially extractable from their acreage.
“We think we have in the trillions of cubic feet for natural gas,” Rowlee said, “but we won’t really know what we have until we drill.”
Ehm did say it would take a very major find to make development economic, “although energy for local use could be a tremendous boon to the local populace.”
Trio was founded in 1983 by former Occidental Petroleum executives, two of whom are Eschner and Rowlee.
Editor’s note: The State of Alaska reimburses up to 40 percent of the cost of exploration on state, federal, Native and private acreage in Alaska. And the state’s tax take increases and decreases with oil prices and the level of investment: The more you invest, the less tax you pay. The state also offers credit for capital investments, plus a 25 percent credit for net losses.
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