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Vol. 21, No. 2 Week of January 10, 2016
Providing coverage of Alaska and northern Canada's oil and gas industry

Extension sought

BRPC cites drilling difficulties, wants time to put Mustang on production


For Petroleum News

Brooks Range Petroleum Corp. wants another year to bring the Mustang field online.

The operating arm of a multi-party joint venture is asking the Alaska Department of Natural Resources to extend the term of the Southern Miluveach unit agreement to March 31, 2017, to accommodate delays in an ongoing effort to bring the Mustang field online.

Through a recent plan of development, the independent company had already publicized some of its technical difficulties at the North Slope oil field in 2015. The current request is administrative in nature. An extension would give Brooks Range Petroleum time to complete the initial production wells required to bring the field into production in 2017.

While the company has already drilled three development wells, it was only able to bring one injection well into operation. Technical difficulties stymied the two production wells.

Toward the end of 2015, the state approved a third plan of development for the Southern Miluveach unit. Instead of covering activities a year or longer, as is typical for plans of development, this plan covered just a few months, until the end of the unit agreement.

Under the plan of development, Brooks Range Petroleum must complete outstanding engineering work, commission remaining production modules and either modify its existing drilling rig or secure a contract for a different rig by the end of March 2016.

A one-year extension would give Brooks Range Petroleum additional time to complete the associated drilling activities that are required to bring the unit into production.

To support its request, Brooks Range Petroleum has pointed to previous work.

To date, the company and its partners have spent approximately $145 million on the project, according to Brooks Range Petroleum. Those costs include building the Mustang Road and Mustang Pad, drilling wells and conducting associated engineering and studies.

The state is taking comments on the request through Feb. 1.

A slow start

When the state approved the five-year Southern Miluveach unit agreement in 2011, Brooks Range Petroleum said it planned to bring the unit into production by July 2014.

By the time the company submitted its first plan of development for the unit in October 2013, it had slightly deferred the timeline, placing first oil “as early as 4Q 2014.”

In August 2014, the Alaska Venture Capital Group LLC and Ramshorn Investments Inc. sold most of their Alaska oil and gas operations - including complete ownership of their operating arm Brooks Range Petroleum Corp. - to a new three-party joint venture.

According to state Division of Oil and Gas documents from early December 2015, Brooks Range Petroleum now operates the Southern Miluveach unit on a behalf of seven working interest owners. The three-party joint venture is Caracol Petroleum LLC (36.28 percent), TP North Slope Development LLC (22.46 percent) and MEP Alaska LLC (10.37 percent). The Alaska Industrial Development and Export Authority also invested in the infrastructure associated with the project and is a working interest owner through two joint ventures: Mustang Operations Center 1 LLC (20 percent) and Mustang Road LLC (1 percent). And Ramshorn Investment Inc. (6.08 percent) and AVCG LLC (3.82 percent) each retained small working interests in the unit after the sale closed.

The sale brought Brooks Range Petroleum some stability when it came to financing but delayed its timeline. In late 2014, in documents supporting its second plan of development, the company moved the startup date for the unit to April 2016. Hitting the target would require contractors to simultaneously progress engineering, design, procurement and fabrication for various aspects of the development, the company said.

Technical difficulties

When Brooks Range Petroleum submitted its proposal for a third plan of development in September 2015, the company moved its target once again, this time to late 2016.

The company blamed the delay on technical, political and economic obstacles.

“Due to a myriad of mechanical and reservoir problems encountered while drilling during the period of the 2nd POD, none of the wells intended as producers were completed in the Kuparuk reservoir,” Brooks Range Petroleum told state officials in the plan of development. The problems largely involved subsurface conditions encountered during the drilling process in 2015. To resolve the problem, the company needed to modify its rig with managed pressure drilling equipment or find a rig with this equipment installed.

The Mustang field is targeting a somewhat geologically complex reservoir in the Kuparuk sands. The reserves are contained in 11 individual fault blocks, according to Alpha Energy Holdings Ltd., one of the partners in the project. The development program calls for horizontal production wells to target these blocks and vertical injection wells.

In early 2015, Brooks Range Petroleum used Nabors rig 16E to drill the 9,140-foot SMU M-02 injection well, which was also known as the Lipizzan well. The vertical well passed through approximately 13 feet of Kuparuk C sand, as was expected at the location, as well as approximately 15 feet of deeper Kuparuk A sand, which was unexpected at that location (and never incorporated into earlier reserve estimates), according to Alpha.

Geologic challenges combined with rig conditions led to cost overruns, according to Alpha. As such, the company said it intended “to seek a credit from the drilling contractor as compensation for the poor performance while drilling the SMU-02 well.”

In March 2015, Brooks Range Petroleum began drilling the SMU-03 well, which was also known as the Shamrock well. The well was intended to be the first horizontal production well in the program. The company successfully cased the surface section of the well at approximately 2,500 feet and ran intermediate casing to 7,231 feet.

But “just prior to cementing operations shallow sections of the well started to become unstable meaning cementing the well would be problematic,” according to Alpha.

After attempts to stabilize the well were unsuccessful, the companies plugged and temporarily abandoned the well while they studied the situation. Even with the problems, the rig performed better on the second well, which cost considerably less than the first.

In June, Brooks Range Petroleum returned to the SMU M-01 pilot well, which it had originally drilled to an intermediate casing depth in 2012. The company intended to add a 5,800-foot lateral section and complete the well as a producer. As with SMU-03, the well encountered higher than expected formation pressure. The lateral was unsuccessful.

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