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Vol. 17, No. 48 Week of November 25, 2012
Providing coverage of Alaska and northern Canada's oil and gas industry

Explorers 2012: Great Bear to accelerate program

Has found expected oil in source rock and wants to shorten time to decision on full-scale shale development

Alan Bailey

Petroleum News

Having found oil in source rock horizons when drilling its first shale oil test well, Great Bear Petroleum Ventures, Great Bear Operating LLC and and its affiliated limited liability companies are moving ahead with the shale oil program that it is pioneering on Alaska’s North Slope.

“I can tell you with absolute confidence that where we thought we would find oil in these source rocks, we found oil,” Ed Duncan, Great Bear’s top executive, told the Alaska Oil and Gas Congress on Sept. 19. Duncan was referring to tests carried out on rock cores collected from the Alcor No. 1 well, the first of six test wells that Great Bear has staked out along a north-south fairway, next to the Haul Road, to the south of Deadhorse in the central North Slope.

Proof of concept

Great Bear’s plan has been to drill the wells vertically and, if tests of cores taken from the wells prove successful, drill horizontal sidetrack wells out from the vertical well bores, through source rock zones, to test the production of oil from the rocks. And, having completed the Alcor No. 1 vertical well, the most northerly of the planned wells, Great Bear has been drilling the next well south, the Merak No. 1 well.

Having seen the encouraging results of testing the core from the Alcor well, Great Bear wants to accelerate its Alaska shale oil program by moving a decision on whether to proceed to a full-scale development from 2014 to the middle of 2013. In order to achieve this, the company has requested approval from Alaska’s Division of Oil and Gas for extended production testing from its test wells.

Merged testing

Originally the company was going to do a pilot well pad development, for extended production testing, before making a development decision — the company has now decided that it can eliminate that pilot project and hence gain some time by merging the extended testing into the testing of the wells currently being drilled, Pat Galvin, Great Bear’s vice president of external affairs, has explained to Petroleum News.

Great Bear’s existing plan assumes just 15 days of testing for each of those initial wells but the company now says that it wants to extend that testing period to up to 180 days. Extended testing will enable the evaluation of critical parameters, in particular the production rate decline curves for the targeted oil resources, the company says.

Great Bear has also asked permission to drill a second Alcor well, saying that a drilling problem in the No. 1 well resulted in the installation of well casing that is unsuitable for drilling the horizontal sidetrack needed for production testing.

The shale oil phenomenon

The development of shale oil and gas has revolutionized the North American oil and gas industry, enabling an increase in domestic oil production and opening up prolific new natural gas resources. The Bakken play in North Dakota, the Eagle Ford in Texas and the Marcellus shale in Pennsylvania all exemplify this new era for energy production.

Shale production involves drilling a multitude of horizontal wells through the relatively impermeable rocks that have generated oil and gas. The pumping of water at high pressure into the wells to fracture the rocks then enables hydrocarbons to flow into the well bores. In this process, known as hydraulic fracturing, or “fracking,” sand and other additives in the injected water keep open the rock fractures as the pressure drops, while also lubricating the flow of hydrocarbons from the rock pores. And, in a technique known as multistage fracking, the fracking is carried out sequentially in a series of zones along the horizontal well bore, rather than being done along the entire length of the well as a single operation.

Although horizontal drilling and fracking have been carried out in North Slope oil fields for many years, to tease more and more oil up production wells, all of the fields are conventional in nature, involving oil trapped as discrete pools in porous and permeable reservoir rocks, the oil having flowed from source rocks into the reservoirs at some time in the past.

But northern Alaska has a reputation for being particularly source rock rich, with some world-class source rocks having created giant conventional oil fields such as Prudhoe Bay and Kuparuk River.

So, could those source rocks still contain oil, ripe for extraction using state-of-the-art shale oil development techniques?

Created a splash

Great Bear created ripples of interest through the Alaska oil industry when in October 2010 it plunged into the state’s North Slope areawide lease sale, buying more than half a million acres in leases along a broad fairway south of the producing oil fields, and saying that it hoped to pursue a program of shale oil development.

Duncan, who has in the past worked as a geologist in the Alaska oil industry, has said that in determining Great Bear’s lease bids he used a model of the North Slope petroleum system developed by Schlumberger, based on science done by the U.S. Geological Survey and Stanford University. That model estimated that in the past the primary North Slope source rocks had been heated to the appropriate temperatures for oil formation along a zone right under the fairway of Great Bear’s leases, Duncan said.

And an assessment of unconventional resources on the North Slope, published this year by the U.S. Geological Survey, has confirmed that view.

Three source rocks

Essentially there are three main North Slope source rock systems: the late Triassic Shublik, the Jurassic lower Kingak and an assemblage of rocks of Cretaceous age, including the Hue shale and HRZ or GRZ. The zone in which rocks were likely heated to oil generating temperatures dips northward under the Slope, apparently intersecting the source rock horizons along a fairway extending west to east in the northern part of the region, and including the area where Great Bear has its leases, to the south of the Prudhoe Bay and Kuparuk River fields, USGS geologist Dave Houseknecht has told Petroleum News.

In the absence of any track record of shale oil production in Alaska, the prognosis for oil production from the North Slope source rocks is extremely uncertain — the USGS assessment points to the possibility of anywhere from zero to 2 billion barrels of undiscovered oil that might be produced using established shale oil development techniques.

The Shublik, a particularly prolific oil source containing brittle carbonate rocks that appear especially suitable for fracturing, is the prime candidate for shale oil development; the HRZ/GRZ would also appear to have significant potential; the lower Kingak, while being an excellent oil source, contains much ductile clay and may prove difficult to fracture effectively.

Great Bear’s test wells along the Haul Road are penetrating and sampling all three source rock intervals.

Factory drilling

Because oil does not flow through impermeable source rocks, instead having to be jolted out through artificially created fractures, a shale oil development involves the drilling of many wells, with each well only accessing oil from a relatively limited area of the subsurface. Great Bear, assuming that the “proof of concept” drilling that it is now conducting pans out, has proposed a “factory drilling” program in its leases, involving the use of about 20 drilling rigs to drill perhaps 200 wells per year. That could lead to the drilling of as many as 9,000 wells over three 15-year phases, the company has said.

In concept, the company would build eight new well pads per year to keep up with the drilling program, with each well accessing about 160 acres of the subsurface, Duncan has said.

Many challenges

A drilling program of this type, completely unprecedented in scale on the North Slope, would present many challenges. Duncan has said that one of the biggest issues would be finding enough appropriately trained personnel to conduct the program.

A “factory approach” to the issuing of the necessary permits may also be crucial, to enable drilling to proceed at the necessary rate.

And what about the vast amount of water that would be required for the fracking?

Duncan says that there is a relatively shallow aquifer, charged with brackish and salty water, unsuitable for drinking but usable for fracking, under the North Slope. Consisting of multiple sands 50 to 100 feet thick, with a total thickness of 2,000 to 3,000 feet, the aquifer contains massive quantities of water, Duncan has said.

Duncan has also said that his company anticipates using water recycling technologies to minimize its water usage.

If the shale oil program proceeds as envisaged, oil production from the play could rise to 200,000 barrels per day by 2020, 350,000 barrels per day by 2035 and 450,000 barrels per day by 2041, peaking at 600,000 barrels per day by 2056, and with production continuing around 450,000 barrels per day through 2074, Duncan has said. The cost of the program would amount to $2 billion per year, plus infrastructure, he has said.

Halliburton

Anxious to progress with some test drilling and initially working alone, trying to secure the use of a drilling rig for what proved to be an exceptionally busy exploration drilling season in the winter of 2011-12, on Nov. 1, 2011, Great Bear announced that it had formed a partnership with Halliburton, the world’s second largest oil services company, to pursue the Alaska shale oil venture. Halliburton had already accrued significant expertise in the use of shale oil technologies outside Alaska.

But exploration drilling rigs continued to prove elusive during that winter and it was not until the spring that Great Bear procured the use of the Nabors 105AC rig for its drilling project. With the Great Bear drill sites close to a highway, within an area already disturbed by industrial activity, the company had obtained permission to drill year-round, rather than just during the winter. And in early June Great Bear moved the Nabors rig to the Alcor No. 1 site, in preparation for drilling the first well.

3-D seismic

During the winter, in preparation for that drilling, the company had contracted with CGG Veritas to shoot a 3-D seismic survey across the area of its test drilling — Duncan has said that his company intends to expand that survey during the 2012-13 exploration season.

Great Bear has also conducted a Lidar survey, using a laser-base system for measuring surface topography but which, in the form used by Great Bear, can also measure the bathymetry of lakes. Duncan told the Alaska Oil and Gas Congress that the results of this survey will feed into an environmental assessment that Great Bear was just starting, with the ultimate aim of completing a regional environmental assessment and environmental impact statement for the company’s program. Great Bear will also be conducting an aquifer study, Duncan said.

North Slope Borough

And the North Slope Borough, the local government with jurisdiction over the territory in which Great Bear is operating, seems happy with the company’s environmental track record so far.

During a speech at the Alaska Oil and Gas Congress borough Mayor Charlotte Brower commented that during a visit to the Alcor No. 1 drilling site borough staff had noted the exemplary condition of the site, including the use of rig mats to protect the ground; the lining of the drill pad; and the voluntary placement of a berm around the site, to ensure protection of the nearby Sag River in the event of an accident.

At that conference Duncan extolled the advantages and potential benefits of the siting of his company’s pioneering efforts, close to the existing oil infrastructure. Production facilities would enjoy access to the nearby trans-Alaska oil pipeline, a line that is currently running well below capacity and that is suffering from declining throughput. And oil service companies with appropriate expertise already operate in the state, Duncan said.

With the Alcor No. 1 well penetrating all three major source rocks, which turned out to be a bit thicker than expected at the well location, Duncan clearly feels optimistic about the future of his company’s Alaska adventure.

“To date, at least, the outcome has been very, very, very good,” he said.



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