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Providing coverage of Alaska and northern Canada's oil and gas industry
May 2005

Vol. 10, No. 19 Week of May 08, 2005

EXPLORERS USA 2005: Every which way

Explorers head north of Barrow Arch; Shell returns to Alaska, Beaufort OCS

Petroleum News

The March 30, 2005, Beaufort Sea federal lease sale, which saw the return of mega-major Shell Oil to Alaska, could signal the beginning of a new era for the state’s oil and gas industry.

Shell, spending more than $44.4 million on 86 winning bids out of a total $46.7 million, purchased swathes of leases along a trend stretching east from Harrison Bay to an area north of the Arctic National Wildlife Refuge. These leases lie well north of a structural high called the Barrow Arch in an area where a relatively young rock sequence known as the Brookian dominates the geology.

Exploration in the northern part of Alaska is currently moving west into the National Petroleum Reserve-Alaska along and just to the south of the Barrow Arch.

If a gas pipeline gets sanctioned to take North Slope gas to market then exploration will likely move south from the Arch towards the Brooks Range Foothills where gas explorers such as Anadarko Petroleum and Petro-Canada hold hundreds of thousands of acres of gas-prone leases.

If the 1002 area of ANWR is opened to drilling, exploration will no doubt move east along the Barrow Arch, a subsurface tectonic “bump” that runs southeast from Barrow, parallels the Arctic coastline, goes right through Prudhoe Bay and points directly at the 1002 area of ANWR.

Traditional exploration plays in northern Alaska have tended to focus on the Barrow Arch. Fields like Prudhoe Bay and Endicott lie on the Arch in a rock sequence known as the Ellesmerian. Other fields like Kuparuk River and Alpine lie in another sequence known as the Beaufortian. The Ellesmerian sequence consists of strata ranging in age from Devonian to Jurassic, while the Beaufortian sequence ranges from Jurassic to early Cretaceous.

Pioneering exploration needed

Compared to the south side of the Barrow Arch the north side has not had the benefit of the newest technology, Ken Boyd, an oil and gas consultant and former Alaska Division of Oil and Gas director, told Petroleum News.

“Some 3D seismic has been shot, but the offshore begs to have more — and more modern — data. New technology doesn’t make better rocks but it will certainly help sort out the complexities in this under-explored part of Alaska. Having an experienced explorer like Shell at the helm doesn’t hurt either,” Boyd said following the March 30 lease sale.

With promising geology but very sparse well data, exploring north of the Barrow Arch involves significant risk but major potential. Problems at BP’s Badami field illustrate the technical risks — Badami’s reservoir is in a Brookian stratigraphic trap. However, several fields in the Brookian have proved successful.

“These Brookian reservoirs work in some places like Tarn and Meltwater but they don’t work everywhere,” Boyd said.

The Brookian consists of sediments that eroded from the Brooks Range during Cretaceous and Tertiary times. The sediments spilled out over the North Slope and onto the Beaufort Sea continental shelf.

It’s all a voyage into the unknown.

“The offshore is as unknown as the onshore 20 years ago,” Boyd said, indicating offshore areas such as the Beaufort and Chukchi Seas present the best potential for major new oil finds in northern Alaska.

“The Barrow Arch has been the major oil feature in Alaska since the beginning of Prudhoe Bay and it hasn’t changed. Some people will say the geology doesn’t work north of the Arch because they didn’t find oil in the Saddlerochit at those earlier offshore wells. … They were chasing Prudhoe Bay rocks, the Saddlerochit, so they wrote it off and gave up … just like they did in the Colville and NPR-A. But Saddlerochit isn’t the reservoir at Alpine; it isn’t the interval at NPR-A. … When they went back in recent years and looked at other rocks, the Alpine, they found oil in the Colville and NPR-A,” Boyd said.

With the exception of ANWR and NPR-A, he believes the future of northern Alaska oil and gas exploration is offshore in the Beaufort and Chukchi seas.

“The Chukchi is a huge, amazing, world class basin,” Boyd said. “And at some point Shell or another big explorer is going to move into that basin.”

But the Beaufort, he said, will be first as it is closer to infrastructure.

“I still believe that you’re running out of rocks onshore, especially on state lands. I’m not talking about ANWR, I’m not talking about NPR-A. I’m talking about onshore state lands between the Canning and the Colville rivers,” Boyd said. “If you look at lease maps over time you’ll see these leases blink on and blink off, blink on and blink off again, but if you move along the Barrow Arch down to onshore lands, that’s where the oil is. It just is. … As you get farther south off the Barrow Arch you get down into gas-prone acreage where there’s very little oil. The rocks were buried too deep, the rocks were heated too much. … Everybody draws that line of death in a different place, but it’s there somewhere.”

In an interview five days before the March 30 sale, Boyd said someone needs to pioneer new exploration north of the Barrow Arch. His preferred company? Shell.

And Shell it was. Both Shell and North Slope oil producer ConocoPhillips may be looking to do exactly the type of pioneering exploration Boyd thinks is essential offshore Alaska’s North Slope.

Most Shell leases on Brookian plays

Susan Banet, an MMS supervisory geologist, told Petroleum News that most of the new Shell leases appear to be on Brookian plays. The leases include the 100 million to 200 million barrel Hammerhead field off of the Point Thomson unit and the 160 million to 300 million barrel Kuvlum field which is further east. These fields were discovered from drilling in 1986 and 1992 and have reservoirs in Brookian fault blocks.

Shell made its biggest bid of $12,220,173 for the block containing Hammerhead.

ConocoPhillips picks up leases to the west

ConocoPhillips also picked up some leases in what appear to be Brookian plays, at the west end of the sale area, some distance offshore northeast of Dease Inlet. These leases occur in an area where a series of hinge-line faults slice through Brookian strata. The faults mark the transition from the continental shelf to the continental slope of the Arctic Ocean.

“They would be the Brookian-faulted western either topset or turbidite (play),” MMS geophysicist Peter Johnson said.

ConocoPhillips has also purchased blocks around the Brookian McCovey prospect near Beechey Point. It’s not clear whether ConocoPhillips plans to explore the McCovey play but the leases are too far north for a classic Barrow Arch play.

“It would not be any of the traditional Ellesmerian — that type (of play),” Banet said. “It’s too far out.”

Offshore ANWR leases on merits

Shell also purchased leases on the prospective Camden anticline, a major structure in Tertiary Brookian strata north of the western end of the Arctic National Wildlife Refuge.

There is a cluster of intriguing Shell leases at the extreme east end of the sale area, north of the eastern edge of ANWR. These leases appear to lie in the Brooks Range fold and thrust belt, where the target plays are unclear and could involve several different rock sequences.

“That’s a big question mark,” Banet said.

Shell spokeswoman Kelly Op de Weegh said the selection of the leases near ANWR was not related to the recent vote in the U.S. Senate to open the 1002 area of ANWR to exploration.

“Our leases north of ANWR were purchased solely on their merits alone without any regard for whether or not ANWR will open in the future. We have been looking at this area for awhile,” she told Petroleum News after the lease sale.

Alaska key new area for Shell

In September 2004 op de Weegh said Shell had spent the past 18 months reviewing Alaska’s potential. Shell’s global exploration director, Matthias Bichsel, told Oil Daily in September that Shell sees Alaska, along with North Africa, the Russian Arctic and the global deepwater, as an area of key upstream potential.

“Globally we have a commitment to grow through exploration for new material oil and more integrated gas,” op de Weegh said after the March lease sale. “And we certainly believe Alaska, because of its large resource potential, is a wonderful place to find oil and gas. As you know, we have been investigating returning to Alaska for some time and this lease sale has allowed us to build a new position there for Shell.”

Op de Weegh said that once MMS officially accepts the bids, probably in May, “we will move into an evaluation phase of the leases and that will begin a permitting process during which we will ask for information from stakeholders in the area.”

Shell will also discuss a Beaufort Sea 3-D seismic shoot with stakeholders in the area. She said “protecting the environment and local species, including marine mammals … is part of our overall commitment to sustainable development” around the world, and Shell “will work closely with local stakeholders and take their concerns into consideration with every development decision we make.

“Sustainable development is what we refer to as developing a project in a way that it does not negatively impact the people and environment near it. You want to leave an area in the same or better condition than what you found it. In Alaska that will involve working with stakeholders and understanding how our operations may or may not impact their environment and their livelihood.”

Joint venture possible

Op de Weegh said Shell would consider a joint venture partner to explore and develop its Beaufort Sea acreage. “We don’t have anything to announce in that regard yet,” she said. “We’re taking it one step at a time but it is a definite possibility.” In time Shell will also likely have a presence in Anchorage, she said, but no final decision on a local office has been made yet.

Shell is also interested in other areas of Alaska, she said.






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