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Vol. 11, No. 38 Week of September 17, 2006
Providing coverage of Alaska and northern Canada's oil and gas industry

Teck Cominco on the move

Applies for NW Alaska unit to produce gas for mine from shallow reservoir

Kristen Nelson

Petroleum News

Teck Cominco Alaska is moving forward with a project which could result in the production of natural gas for use at the company’s Red Dog mine in northwestern Alaska.

Teck Cominco has applied to form a 19,200-acre unit adjacent to its Red Dog lead-zinc mine.

The Alaska Department of Natural Resources Division of Oil and Gas said Sept. 10 that Teck Cominco would be the operator and sole working interest owner for the proposed Sakkan unit, which covers approximately 19,200 acres in four shallow gas leases in sections 2-5, 8-11, 14-17, 20-23, 26-29 and 34-36 of township 32 north, range 19 west, Kateel Meridian, and sections 1-3, 11-4 of T31N, R19W, KM.

Teck Cominco has been exploring for gas in the area since the late 1990s, with the goal of using the local resource to replace diesel fuel at the mine.

Four shallow natural gas leases extended in 2003

The four shallow natural gas leases were extended by three years in October 2003. Mark Myers, then director of the Division of Oil and Gas, said the extension decision was “based upon the exploration activity already conducted on the leased and adjacent areas, and the likely prospect of further exploration activities and possible development and production.”

Prospects identified by past mineral prospecting range from a mile from the mine and mill complex to within 10 miles of the mine. Teck Cominco has said in the past it would like to use natural gas to replace 18 million gallons of diesel used at the mill each year.

The natural gas resource at Red Dog is shale gas in the Kuna formation. An estimated 60 billion cubic feet over 20 years would be required to replace the diesel, and the estimate in 2002 was that 40 to 60 wells would be required.

The company completed two wells, NB 01 and NB 02, in sections 17 and 18 of T13N-R18W, KM, in 2005.

Teck Cominco permitted three exploratory wells this summer, NB 03, NB 04 and NB 05, two in section 17 and one in section 18 of T13N-R18W, KM. All five of these wells are vertical holes.

All five of these wells are on NANA Regional Corp. land in the North basin area north of the mine.

Exploration plans

Teck Cominco said in its unit application that the 2005 wells were the first of a five-spot test drilling program.

Shale gas potential was first recognized in the Red Dog area in the mid-1990s “when gas bubbles were observed in various mineral exploration core holes” in the area of the proposed Sakkan unit. During several field seasons data was collected from core holes, including downhole geophysical tests.

The company said the location for the wells was chosen because of proximity to geologic control and to minimize the length of access roads and handling of produced water.

The NB 01 well had a total measured depth of 2,745 feet and a true vertical depth of 2,740 feet. It was hydraulically fractured in four stages and rod pumped to dewater. The NB 02 was drilled to a MD of 3,110 feet and a TVD of 3,104 feet. It was also hydraulically fractured in four stages and rod pumped in an attempt to dewater.

One of the 2006 wells, NB 03, was planned to a depth of 3,500 feet; the other two to a depth of 3,000 feet; all were to be hydraulically fractured in four or five stages and dewatered.

Barge season limiting factor

Teck Cominco said drilling and completions would be during the barge season window, July to September.

In the application the company said that if four consecutive barge seasons pass without any wells or stratigraphic core holes within the Sakkan unit, then the unit would be terminated Oct. 31, 2010.

Three to four wells were planned for 2006, to complete the initial five-spot pattern, the company said, with a fourth well in the program a possible re-drill of NB 01. Teck Cominco said that well “is time dependent due to the short summer drilling season and barge schedules for demobilization.” NB 06, which had not been permitted as of early September, was a proposed 3,000-foot re-drill of the NB 01.

In addition to access roads and drill pads, Teck Cominco said it would build an all-season produced water pipeline to the Red Dog mine tailings pond so that “well dewatering and production testing can be continued through the winter months.” Dewatering the wells is expected to take nine months or more and gas production potential can’t be assessed until after dewatering, the company said.

Testing in 2007

Teck Cominco said it expects to have stabilized gas production by late spring 2007 and will spend the remainder of that year evaluating true production potential of the wells, with no additional drilling planned in 2007.

If there are positive results from the production testing, exploration will begin on state acreage within the Sakkan unit in 2008, with as many as six stratigraphic core holes planned; the holes will be geophysically logged and samples analyzed.

Also in 2008, production testing will be continued at the original five-spot location to assess decline rate.

Also during this period the company said it would start a feasibility study to determine development costs, number of wells required for commercial production, schedule for development tasks and permitting.

A second five-spot production test is planned for 2009, with the location determined after the 2008 stratigraphic program.

“The target is a project go/no go decision by early 2011,” Teck Cominco said. Full development is expected to require 24 to 36 months for permitting and engineering, and those tasks are tentatively scheduled to begin in 2010, with project engineering to be completed in 2010 along with continued permitting and extended production testing at the second five-spot location.

If a decision is made to go ahead with the project, construction of roads and drill pads is scheduled for the spring and summer of 2011. Development drilling would also begin in 2011.

The initial plan of exploration would terminate the sooner of five years after the effective date of the unit or on Oct. 31, 2011.

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