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Great Bear gets more and more good news about its North Slope Alaska shale oil program
Great Bear Petroleum LLC is expanding its North Slope shale oil drilling program this year because of newly acquired geologic data and news that it can drill year-round.
The Alaska independent is planning a program that involves drilling up to three vertical wells with at least one lateral extension from each well bore between now and next spring. Great Bear plans to start two of three vertical segments in late September.
“We hope to keep a drill rig busy year round,” Great Bear President and COO Ed Duncan told Petroleum News on June 21.
Great Bear is in the process of choosing the rig it plans to use for the program. The complete development plan calls for 20 rigs to drill 9,000 wells over a 45-year period, the company said previously.
When Great Bear announced its original plans in late 2010, the newly formed Alaska independent planned to drill four, 11,000-foot, slim vertical core holes in the second half of 2011, and two production test wells in the first quarter of 2012. The production test wells would both have full-diameter, 11,000-foot vertical legs with at least one 4,000-foot production lateral. Under that plan, Great Bear would have likely drilled two additional production test wells in 2012-13, to refine the final well design for the full program.
But because its general contractor, SolstenXP, identified previously used gravel sites along the Dalton Highway, Great Bear no longer needs to wait for seasonal tundra openings to begin operations, allowing it to accelerate its plans by as much as a year.
“Our approach to proof of concept shifted forward by almost a year,” Duncan said.
The three-inch core holes would have provided geologic data to help Great Bear design the production laterals, but not as much data as the full-diameter core holes will provide.
“More rock is better than less rock. We can run a lot more tests sooner, tests that are fundamental to the design of our (hydraulic fracturing program),” Duncan said.
The full-diameter verticals also cut down on early drilling. Now, once Great Bear finishes testing its core samples, it can use the existing well bores to drill production laterals into the source rock. “We don’t have to re-drill anything,” Duncan said.
The pioneer in Alaska shale development said the laterals would be hydraulically fractured as test wells to prove oil can be produced from the Shublik shale, one of three world-class source rocks that are stacked in Great Bear’s central North Slope leases. From the deepest to shallowest, they are the Triassic-age Shublik, the Jurassic-age Kingak and the Cretaceous-age HRZ/GRZ/Pebble shale. These rocks are the source of the largest oil fields across the North Slope, including Prudhoe Bay and Kuparuk.
In presentations before Alaska lawmakers earlier this year, Duncan estimated that the Great Bear 500,000-acre leasehold contains at least 2 billion barrels of recoverable oil and 12 trillion cubic feet of natural gas, at a recoverability rate of 5-6 percent.
“The percentage of hydrocarbon recovered is a moving target,” Duncan said in legislative testimony. “Two years ago it was probably 3-4 percent. Now it’s 5-6 percent, and it’s improving. Technology in this particular field is moving at a spectacular pace, and it’s driven by the success of the plays like the Bakken, the Eagle Ford, the Barnett, the Marcellus, and so forth. … We’re using 5-6 percent as our base case today. My suspicion is … it will be higher than that by the time we drill our full production test next January.”
Parallel production likely Great Bear is also encouraged by newly acquired geologic data.
The company originally planned to take core samples from two of the three source rocks, but is now planning to collect samples from all three during its upcoming program.
More significantly, because of recent evidence that indicated the Shublik and HRZ have a “higher natural fracture density,” Great Bear is now considering a parallel development project — producing from both source rocks right off the bat, rather than starting with the Shublik and moving to the HRZ or Kingak at the end of the first 15-year production cycle.
This potentially means producing more oil faster. Great Bear expected to yield 200,000 barrels a day by 2020 by just tapping the Shublik over the first 15 years of development (see company chart in Petroleum News’ special report on shale at http://bit.ly/md6kzE).
“It’s throwing another ball up in the air, but if it works the way we’re thinking it’s going to work based on what we’re seeing right now, we’ll have a dual production program,” Duncan said, adding, “We’re a big company in a little company body.”
More conventional oil than expected That geologic information — taken in part from five northern Alaska legacy wells with “legitimate well stem tests” going back to the 1970s and 1980s — also suggests Great Bear might have more conventional oil targets in the Shublik than it initially expected, which means some of the oil could flow without fracturing and stimulation.
Of those legacy wells, Duncan said one flowed at 2,000 barrels per day (an extrapolated rate taken from a brief test). He declined to name the well, noting that Great Bear “worked very hard at uncovering what was effectively buried information.”
That said, in the course of the interview he mentioned a well at Gull Island.
Gull Island State No. 1, drilled by ARCO in the mid-’70s, was the only Gull Island well drilled into the Shublik.
Former U.S. Geological Survey geologist Ken Bird previously told Petroleum News that the directional well drilled a faulted block of rock known as a horst and recovered oil from a 9-foot-thick interval at the base of the Shublik. The well tested at 1,144 bpd, according to the Alaska Oil and Gas Conservation Commission.
Little geologic risk The Great Bear program is different than traditional North Slope exploration.
Typically, companies drill until they make a discovery, but because source rocks are, by definition, saturated with oil, there are no dry holes. “The geological risk is not really very high in our opinion,” Duncan said. “It’s approaching 1.0: virtual certainty.”
Companies exploring source rocks must manage engineering risk: designing lateral wells and a hydraulic fracturing program that maximizes production and keeps costs down.
Like operators in the Bakken of North Dakota and the Eagle Ford of Texas, Great Bear will be looking at thermal maturity, natural fractures and total organic carbon content.
Duncan spent years chasing prospects in emerging basins around the world and said this process is unlike any in his resume. “The closer we get, the more certain I feel, which is completely back to front compared to most new venture exploration prospects,” he said.
Update on water usage, permitting Great Bear is also moving ahead on water usage, permitting and contracting.
Despite adequate surface sources of water in the area, the company plans to tap the “almost limitless supply” of subsurface sources because Duncan said brackish water works better than fresh water for hydraulically fracturing.
The company plans to use recycling technologies to reduce flowback disposal. “It’s possible that will be putting water back into the aquifer that’s cleaner than what we took out,” Duncan said.
Early disposal will probably go to existing Prudhoe Bay facilities, but Duncan said Great Bear would likely build independent disposal facilities in the future.
Permitting is already under way for the program this fall. Duncan said Great Bear recently filed its oil discharge prevention and contingency plan, or C-Plan.
ASRC Energy Services is handling the water surveys and permitting.
Duncan said Schlumberger Ltd. is currently the only company on the North Slope capable of doing complete hydraulic fracturing and stimulation operations, but added that he expects more service firms to be able to do so in the near future.
Great Bear also hired former Alaska Department of Revenue Commissioner Pat Galvin, with the law firm K&L Gates, and former DOR Tax Division Director Jon Iversen, with the law firm Stoel Rives, both on a contract basis.
Great Bear’s newly opened Anchorage office is downtown, in Suite 505 at Key Bank Plaza.
—Eric Lidji and Kay Cashman
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