Providing coverage of Alaska and northern Canada's oil and gas industry
December 2017

Vol. 22, No. 49 Week of December 03, 2017

A great NS opportunity

Armstrong geologist comments on Pikka project and involvement of Oil Search

Alan Bailey

Petroleum News

The discovery and development of a major oil pool in the Nanushuk formation in the Pikka unit could mark the start of a major resurgence in oil production from Alaska’s North Slope, Armstrong Energy geologist Colby VanDenburg told the Resource Development Council’s annual conference on Nov. 15. Armstrong, in partnership with Repsol, has been planning an oil field development in the unit and has recently signed an agreement for Australia-based Oil Search Ltd. to join the partnership that is developing the field.

As previously reported in Petroleum News, Oil Search is purchasing a 25.5 percent interest in the Pikka unit and adjacent exploration acreage and 37.5 percent interests in the Horseshoe block to the south. Oil Search also has an option to purchase all of Armstrong’s interest in the acreage by June 30, 2019.

Confidence in Oil Search

VanDenburg emphasized Armstrong’s confidence in Oil Search as a reliable company that has been in business since 1929 and that is involved in some major projects in Papua New Guinea.

“So they have some staying power,” VanDenburg said.

He commented that the company is involved with ExxonMobil and Total in two major liquefied natural gas operations in Papua New Guinea, as well as being operator of all of the producing oil wells in the country. Armstrong has enjoyed a long-term relationship with Oil Search through employee connections. Oil Search has long experience of handling the logistics of working in remote and rugged environments. The company is not shy of involvement in really big, long-term projects, enjoys a proven record in safety and environmental responsibility, and has an excellent track record in working with local communities, VanDenburg said.

“For all these reasons we think they’re truly a perfect fit for the Nanushuk project,” he said.

Armstrong in Alaska

VanDenburg characterized Armstrong Energy’s latest venture at Pikka as the latest of a series of Alaska initiatives resulting from the often counter-conventional thinking of the company’s founder, Bill Armstrong. In 2001 Armstrong, in his first foray into Alaska, began exploring for oil on the North Slope, despite universal advice that the region was the solely the domain of major oil companies. The upshot was the discovery of the Oooguruk and Nikaitchuq fields, now owned and operated by Caelus Energy and Eni, VanDenburg said.

After developing the North Fork gas field in the southern Kenai Peninsula, in 2008 Armstrong returned to the search for North Slope oil, disregarding conventional wisdom at the time of an oil price crash, and during a frenzy by industry to chase shale gas in the Lower 48. A partnership between Armstrong and Repsol drilled 19 wells and acquired three 3-D seismic surveys. The result has been the Nanushuk discovery, with published recoverable oil reserves of 1.2 billion barrels of oil, VanDenburg said

Multi-billion dollar investment

The plan is to develop the project, a multi-billion dollar investment, through the drilling of about 146 wells from three drill sites on the east side of the Colville River. The development will involve the construction of about 35 miles of pipeline and 25 miles of road. A central processing facility will handle field production, projected at some 120,000 barrels per day. The development primarily targets the Nanushuk reservoir but is expected to also result in production from a reservoir found in Alpine C sands, VanDenburg said.

“This is a very large project and will create a lot of jobs for the state,” he said, adding that engineering design work and support for North Slope operations would bring jobs to Anchorage.

Major new play

And the Pikka development appears to mark the emergence of a whole new oil play concept on the North Slope.

The thick sands that form the initially discovered reservoir at Pikka can be traced along a zone more than 40 miles in length. So, defying convention to drill close to the discovery, Bill Armstrong ordered the drilling of the Horseshoe well about 21 miles to the south, at the southern tip of the reservoir sand system, VanDenburg said. Then, with that well discovering the same sand and oil charge as at Pikka, it became possible to confirm the existence of one large oil field, with potentially more than 10 billion barrels of oil in place, he said.

“When you’re chasing fields of that size, it changes everything,” VanDenburg said.

Moreover, the same geology extends for hundreds of miles across the National Petroleum Reserve-Alaska, with 46 prospects identified on just one seismic line, he said. ConocoPhillips has been able to repeat success in the oil play in its Willow discovery in the northeastern NPR-A. And there is much more out there, VanDenburg said.

Fields such as Pikka and Willow, together with other discoveries in the new play, can make a material difference to the declining trend of North Slope oil production that started in 1988, he said.

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