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Providing coverage of Alaska and northern Canada's oil and gas industry
February 2003

Vol. 8, No. 7 Week of February 16, 2003

Alaska fear factor strikes again: independent pulls plug on Sak River

Kansas independent AVCG has dropped the Sakonowyak River prospect, but not giving up on Alaska; will focus on North Slope Colville prospects

Kay Cashman

PNA Publisher & Managing Editor

John Jay “Bo” Darrah Jr., CEO of Alaska Venture Capital Group LLC, told Petroleum News Alaska Feb. 6 that his company has canceled its plans to further explore the North Slope Sakonowyak River prospect in Gwydyr Bay and asked the state to disband the 11,520-acre unit.

The Sak River unit contains both offshore and onshore state leases and abuts the western border of the Northstar unit and is three miles north of the Prudhoe Bay unit boundary.

The Kansas-based independent, which has spurred exploration of the unit, has been unable to find a partner to help fund the venture.

“There were some tough structural geological problems with the prospect that were hard to explain away and that coupled with other North Slope ‘fear factors’ may be why we could not find help to evaluate” the prospect,” Darrah said.

According to the plan filed by operator BP Exploration (Alaska) Inc., a 62 percent owner in the prospect to AVCG’s 38 percent, an exploration well was supposed to be drilled at the Sak River prospect this winter.

The state Division of Oil and Gas “was very good about working with us from the start. The unit’s time leash has always been very short with original lease terms expiring July 31, 2001, and Feb. 10, 2003. Monetary commitments for extension time have been very reasonable to this point in time, but they were becoming more and more expensive to extend a low grade prospect,” Darrah said.

The project could have been funded “100 percent internally,” he said, but “because AVCG is new to the North Slope, we needed verification for our drilling ideas. … Sak River has some tough geological questions that could not be satisfactorily answered enough to lower the risk to the experienced explorationist that looked at the deal.”

AVGC still has “some 110,000 acres under lease” that it intends to hold onto, Darrah said. Under the terms of those leases, the company has “time in which to dispel new entrants’ reservations, fear factors; time to introduce them to the opportunities that were once only available to major companies” on the North Slope.

AVCG’s Colville acreage “is in a hotter play. The traps are stratigraphic and to find sand is usually to find oil and gas,” Darrah said.






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