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Vol. 16, No. 27 Week of July 03, 2011
Providing coverage of Alaska and northern Canada's oil and gas industry

Mounting the Mustang unit

Brooks Range planning exploration and development west of Kuparuk

By Eric Lidji

For Petroleum News

A joint venture led by Brooks Range Development Corp. plans to develop a North Slope discovery it made this winter with the aim of producing oil as soon as July 2014.

The local subsidiary of Kansas-based Alaska Venture Capital Group drilled the onshore North Tarn No. 1 well this past winter two miles west of the Kuparuk River unit. The 6,223-foot well encountered oil-bearing sandstones, but well control challenges kept the company from testing the well, which it plans to do this coming winter, according to a partner on the program.

Brooks Range believes its discovery — called Mustang — could underpin development in the region by improving the economics of several marginal accumulations. The company wants to form the Southern Miluveach unit over 60,684 acres, build independent processing facilities to serve all of those smaller accumulations and kick off a six-well exploration program between now and 2020.

The Southern Miluveach unit would cover 29 State of Alaska leases west of the Kuparuk River unit, including six owned jointly with the Arctic Slope Regional Corp.

“The other potential hydrocarbon accumulations are currently believed to be marginally economic and would not be developed without existing infrastructure and a processing facility within (Southern Miluveach),” Brooks Range wrote in its application to the Alaska Department of Natural Resources. “Likewise, future development of the other potential hydrocarbon accumulation within (Southern Miluveach) using the Mustang processing infrastructure will extend the economic life of Mustang production.”

Brooks Range previously estimated that the Kuparuk Formation at North Tarn No. 1 contained 6 million barrels of oil, enough to make the play economic. The company also said North Tarn included a target in the shallower Brookian Formation that could hold 35 million barrels, but would be more difficult to produce because of complex geology.

Six exploration blocks

Brooks Range plans to develop and explore simultaneously.

For the Mustang development project, the company told the DNR that it plans to have permits in place by the end of 2012, form a participating area by the end of 2013 and begin production by July 1, 2014, according to a plan of development.

As of now, Brooks Range plans to build processing facilities that connect the unit to the Alpine Pipeline, which delivers processed Colville River unit oil into the North Slope’s main pipeline system that leads to the 800-mile trans-Alaska pipeline, which in turn carries the oil to the Port of Valdez.

Meanwhile, Brooks Range would also explore other targets at Southern Miluveach.

According to a plan of exploration, Brooks Range wants to break the proposed unit into six blocks. Brooks Range already fulfilled its first drilling obligation for the unit by drilling the North Tarn No. 1 well this winter in the SE Exploration Block. In its proposed plan to form the unit, the company must drill a second well into the block by March 31, 2012, or lose all undrilled acreage.

Next, Brooks Range must drill a well in each exploration block by the end of March of 2014, 2015, 2016, 2018 and 2020, respectively, or lose all undrilled exploration blocks.

The exploration blocks are prioritized as follows: SE, NE, NW, SW, W and S.

Under its proposed unit plan, Brooks Range also is required to submit a plan of operations by Oct. 1 detailing its plans to complete and test the North Tarn No. 1A well this coming winter and drill at least one of two planned delineation wells on ADL 390680. The 2011-2012 activities also include a summer clean up and field studies program and performing flow tests on the wells.

The program will require a four-mile ice road from existing gravel pads at the Kuparuk River unit to an ice pad that would be constructed at the North Tarn site for drilling work.

Discoveries marginal to date

Although the fairway between the Kuparuk and Colville units is a natural extension of North Slope development, exploration to date hasn’t led to production.

In its filings, Brooks Range identified 18 previous wells drilled in the region between 1966 and 2010 — to depths between around 6,400 feet and 13,000 feet — but aside from five wells drilled at Kuparuk, all have been dry holes. That includes the Ataruq No. 2 and Ataruq No. 2A dry holes that Kerr-McGee drilled in the proposed unit area in 2005.

Brooks Range said that previous attempts to extend production from the Kuparuk Formation west of Kuparuk over the past decade led to discoveries west and north of the proposed Southern Miluveach unit, but that low oil prices and rising drilling costs in the early part of the 2000s stymied those efforts by requiring discoveries to be huge. As a consequence, operators found it difficult to explore for economically challenged, marginal prospects.

Brooks Range believes Southern Miluveach contains several marginal oil prospects that could be economic using new seismic technology and a multiyear drilling program.

Costs to date include Ataruq wells

The Brooks Range joint venture includes TG World Energy, Inc. and Ramshorn Investments, Inc. Kerr McGee (now owned by Anadarko Petroleum) and Eni own working interests in several leases at the unit.

The joint venture acquired its first leases in the area at an October 2003 lease sale and grew its position through lease sales and private deals over the following seven years.

The working interest owners have spent $15 million to date, according to Brooks Range, a figure that includes the two Ataruq wells and a proprietary 3-D seismic acquisition in 2008 covering 200 square miles in and around the greater Southern Miluveach area.

The state is taking comments on the unit proposal through July 28.

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