Savant and ASRC taking on Badami

Reprint from upcoming The Explorers magazine: Denver independent will operate, Alaska Native corp. expands portfolio

Eric Lidji

Petroleum News

The maturation of the North Slope is all about companies bringing new ideas to bear on overlooked projects, and that dynamic could come into play this winter at Badami.

Through a series of business arrangements, a new attempt is under way to make the stubborn North Slope unit as productive as some hoped it would be a decade ago.

The project unites three disparate partners: oil giant BP Exploration (Alaska), tiny independent Savant Alaska and Arctic Slope Regional Corp., or ASRC.

Savant, the local subsidiary of Denver independent Savant Resources LLC, will run the program on behalf of London oil giant BP, the operator and sole working interest owner of Badami. ASRC will be a “minority partner” through its unique relationship with BP.

“If the Savant program is successful, and we are hopeful that it is, then we will have revitalized exploration options on the east-side of the North Slope and we will be a player in its future,” Mark Kroloff with ASRC wrote to Petroleum News in September 2008.

The state approved a plan this summer for the companies to take another stab at Badami.

BP shut the field down a year ago to “recharge” the reservoir, hoping a fallow period would increase pressure underground and aid production. That move came after a decade of frustrating starts and stops to develop the complex geology of Badami.

The turbidite formation at Badami is a series of channels, like fingers on a hand. The trouble has been getting them to “communicate” so that oil moves from one to the next.

Savant hopes to solve that problem with recent advances in drilling technology.

Savant coming off Kupcake

Savant is relatively new to Alaska, but already has experience near Badami.

After picking up North Slope acreage in a March 2006 lease sale, the company drilled the Kupcake No. 1 exploration well this past winter from an ice island in Foggy Island Bay, less than 20 miles west of the onshore-offshore Badami unit.

Kupcake ultimately failed to hit the oil resources Savant set out to find.

But Badami gives Savant a chance to pursue a different kind of project, where the goal isn’t finding commercial quantities of oil, but figuring out how to get known oil accumulations out of the ground, according to Greg Vigil, executive vice president and chief operating officer of Savant, who spoke to Petroleum News in August.

Savant plans to drill the exploration well in one of the satellite fields outside the Badami Sands participating area, but within the larger Badami unit.

Savant plans to drill horizontal wells at Badami and hydraulically fracture the channels to reach more of the oil-bearing sands. Previous attempts to develop Badami have involved hydraulic fracturing, but only on traditional vertical wells, not horizontal wells.

The technology for fracturing a horizontal well simply didn’t exist when BP first tried to develop Badami in the late 1990s, Vigil said.

Hydraulic fracturing involves pumping large amounts of fluid into a well in order to create new avenues in the reservoir for oil and gas to travel to the surface.

Vigil said high oil price alone wouldn’t have justified returning to Badami. Only higher prices in conjunction with the new technology promise to make the venture a success.

ASRC following up with BP

In terms of revenues and earnings, Arctic Slope Regional Corp. is the largest of the 13 regional corporations created by the Alaska Native Claims Settlement Act in 1971.

ASRC holds title to some 5 million acres across the North Slope. Those lands include a percentage of the Colville River unit, extensive acreage across the foothills of the Brooks Range and leases in the Arctic National Wildlife Refuge, and helped the company post more than $1 billion in revenues for three years in a row.

But in addition to owning land, ASRC is also a major player in the Alaska oil industry.

ASRC Energy Services, the main oil field services subsidiary of ASRC, is one of the largest companies in the Alaska oil industry, with more employees in the state than BP Exploration (Alaska), ConocoPhillips Alaska or CH2MHill.

Through its subsidiary PetroStar, ASRC also owns one of the few refineries in Alaska.

But five years ago, ASRC took its first steps toward adding an exploration and production portfolio, in addition to its current work as an oil field services company.

In early 2003, the company entered a “mentoring” agreement with BP. The agreement set up “a framework for sharing data and technical knowledge” between the companies, allowing ASRC to learn about investment opportunities on the North Slope.

The companies hoped the new relationship would be mutually beneficial.

“This agreement provides a critical next step in providing ASRC with access to the tools and knowledge we need to become a competitive, independent producer in Alaska,” Jacob Adams, then president and CEO of ASRC, said in July 2003.

BP hoped the agreement would help bring more North Slope prospects into production.

“This agreement is … hopefully going to provide an opportunity for a company like ASRC to invest where BP would choose not to,” Steve Marshall, then president of BP Exploration (Alaska), said at the time.

Partnerships in the interim

“It has been incumbent upon ASRC to be poised and ready to respond when BP is ready to forward opportunities to ASRC,” Kroloff wrote in September.

To get “poised and ready to respond,” ASRC became involved in a number of other partnerships with companies across the North Slope in recent years.

The company teamed with ConocoPhillips and Union Oil Company of California in 2004 on the Placer No. 1 exploration well on ASRC leases west of the Kuparuk River unit.

More recently, ASRC joined the ongoing efforts of Doyon Ltd. and Usibelli Energy LLC to explore the resources potential of the Nenana Basin just southwest of Fairbanks.

And this past winter, ASRC partnered with Anadarko Petroleum and BG on an exploration well at the Jacob’s Ladder unit southeast of Prudhoe Bay. But Anadarko said it found “no commercial hydrocarbons” upon reviewing well logs this spring.

ASRC will be a minority partner to Savant at Badami, and Kroloff said ASRC sees the program not only as an “investment opportunity,” but also a way to expand the company’s “internal capacity in oil exploration and development.”

“Our subsidiary, ASRC Energy Services (or AES) has contracted to BP for many years to operate Badami. We expect that contract to remain intact and should we be successful in exploration with Savant then we would anticipate AES’s role to increase as development and operational functions increase in the unit,” Kroloff wrote. “For ASRC this is really the proverbial one-plus-one equals three equation.”