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Vol. 9, No. 51 Week of December 19, 2004
Providing coverage of Alaska and northern Canada's oil and gas industry

A step closer

Armstrong files plan, permits for first North Slope production by independent

Kay Cashman

Petroleum News Publisher & Managing Editor

A key member of Armstrong Alaska’s team was in Anchorage in mid-December filing a plan of production operations with the state for what will likely be the North Slope’s first field to be produced by an independent oil company.

Stu Gustafson, Armstrong’s vice president of operations, and Bob Britch, an Anchorage-based consultant who works closely on permitting with Armstrong, have submitted both a plan of operations and all the necessary state, federal and borough permits associated with producing the company’s Two Bits prospect, which is just off the western edge of the ConocoPhillips-operated Kuparuk River unit.

If this winter’s confirmation drilling is successful at Two Bits, Armstrong anticipates beginning production by late 2005 from its own standalone facilities. Initial production is expected to be approximately 15,000 barrels per day. According to the plan of operations, as many as 20 wells may eventually be drilled as part of the proposed development.

“We’ll drill two exploratory wells over this winter. It’s two prospects,” Gustafson told the Alaska Support Industry Alliance this past fall, and if one of those prospects proves up, “we will start production drilling.”

The plan of operations calls for the following:

• Construction of a gravel pad “at or adjacent to the ice pad location to support production activities;”

• Construction of a 35-foot wide permanent gravel access road adjacent to this winter’s exploration ice road;

• Conversion of exploration wells to either production or disposal wells;

• Construction of onsite production equipment at the gravel pad during the fall of 2005; and

• Placement of a buried pipeline inside the access road from the Two Bits production pad to existing infrastructure at or near the KRU 2M pad.

Armstrong said additional wells or drilling operations may be required from the gravel pad, which will be 500 feet by 500 feet.

West Sak 18, a Kuparuk unit gravel pad no longer being used, was listed as a possible alternate site to support production operations.

The gravel access road would run from KRU 2M pad, which is connected to the existing North Slope road system, and head north towards West Sak 18 pad — a distance of roughly 3.5 miles — and then run another mile northwest towards the proposed pad location.

Cracking the 50 million barrel paradigm

Finding oil at Two Bits wouldn’t just be a win for Armstrong, Gustafson said. “If Two Bits works, there’s not enough drill rigs (on the North Slope),” he told Petroleum News in an earlier interview.

Success at Two Bits, he said, would be better for the industry than discovery of a huge new field, because it would mean companies can make money from developing smaller fields than the 50-million barrel size that is the standard now.

The lure of cracking the 50-million barrel paradigm was what brought Armstrong Oil and Gas to Alaska where it founded Armstrong Alaska, Bill Armstrong, president of both companies, told the Resource Development Council of Alaska in November 2002. At that time the company was preparing, with operating partner Pioneer Natural Resources, to drill its first North Slope wells on a prospect that Armstrong developed.

The following year Armstrong brought Kerr-McGee to Alaska. In the last two winters Armstrong participated in five exploration wells with its partners, announcing discoveries at both the Oooguruk and Nikaitchuq units — both of which are being considered for development by operators Pioneer and Kerr-McGee, respectively.

Pioneer and Kerr-McGee are both large independent oil and gas companies.



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