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Vol. 16, No. 45 Week of November 06, 2011
Providing coverage of Alaska and northern Canada's oil and gas industry

Four new units for BRPC

State divides 2 unit proposals into 4 with drilling commitments through 2014

Eric Lidji

For Petroleum News

Over the past year, Brooks Range Petroleum Corp. applied to form two units in the central North Slope fairway between the Colville River and Kuparuk River units.

Instead, it got four, with much less total acreage.

In separate decisions in late October, the Alaska Department of Natural Resources divided the proposed Putu unit into the smaller Tofkat and Putu units, and the proposed Southern Miluveach unit into the smaller Southern Miluveach and Kachemach units.

With the decisions, BRPC must now drill as many as 11 wells and sidetracks, and decide whether to sanction two development projects at the four units by mid-2014.

BRPC is the local operating arm of Kansas-based independent Alaska Venture Capital Group LLC and the operator of a multi-company joint venture that includes Brooks Range Development Corp. (the local development affiliate of BRPC), the Calgary-based independent TG World Energy Inc. and Nabors subsidiary Ramshorn Investments Inc.

The Tofkat and Putu units

BRPC applied to form the Putu unit in March 2011, but DNR didn’t deem the application complete until July. The original proposal covered some 39,993 acres over 39 leases, including 28 owned jointly by the state and Arctic Slope Regional Corp., along the eastern edge of the Colville River, south of the Colville River unit, near Nuiqsut.

The original Putu unit proposed three exploration blocks — North, Southwest and Southeast — but DNR ultimately broke those into two units. The North block is now the Tofkat unit, while the Southwest and Southeast blocks are now the Putu unit to take advantage of the differing geologies and exploration histories within the region.

The Tofkat unit includes 21 leases owned jointly by the state and ASRC covering some 9,131 acres, while the Putu unit includes nine state leases covering some 21,946 acres.

The nine leases not included in either unit will expire at the end of their terms, unless unitized at some point in the future (although two leases expired on March 31, 2011).

DNR also increased the rental rates on numerous leases to make up for the potentially lost revenue it could collect by leasing that acreage out to another company.

Once the 15 leases in the Tofkat unit set to expire between July 31, 2012, and Aug. 31, 2013, reach the end of the primary terms, the rental rates will jump to $4.50 per acre, up from $3 per acre, as will the nine leases in the Putu unit set to expire Aug. 31, 2012.

The working interest owners must also execute a new agreement with ASRC.

Tofkat geology known

The Tofkat unit includes three wells BRPC drilled in the area in early 2008.

BRPC drilled the Tofkat No. 1 well and the Tofkat No. 1-A and Tofkat No. 1-B sidetracks in the N Block in 2008, and in later 2008 acquired proprietary seismic over the area.

The primary target of those wells was “Kuparuk C sands, Brookian Albian-age turbidite fans and Jurassic-age Alpine sands,” three geologic intervals with oil producing reservoirs in the Colville River unit some six miles north of the Tofkat unit.

After reviewing geologic and geophysical information in the application, DNR determined that “a portion of the N block does encompass an oil reservoir within the C member of the Kuparuk Formation, and two reasonably defined and delineated potential hydrocarbon accumulations in the shallower Nanushuk and Torok formations.”

Because the wells drilled in early 2008 penetrated and evaluated both the reservoir and the two potential accumulations, the Tofkat unit is more defined than the new Putu unit.

Under the plan of exploration for the Tofkat unit, BRPC must drill and complete the Tofkat No. 2 well and Tofkat No. 2-A sidetrack into the Kuparuk formation by May 31, 2013. The working interest owners must sanction the Tofkat development project by Oct. 1, 2013 — and keep it sanctioned through production — or terminate the unit.

Putu needs more drilling

Although not home to any previous exploration drilling, the new Putu unit sits mostly within a 220-square mile 3-D seismic package that BRPC acquired in 2008 and used to identify “prospective targets they believe have a higher probability of encountering reservoir quality sand” than the four previous wells drilled within two miles of the unit.

Those wells, drilled between 1972 and 2006, all encountered hydrocarbon-bearing zones in the Brookian Torok formation, “but so far these strata have lacked sufficient reservoir quality to likely produce or warrant development by the operators,” DNR noted in its decision, adding, “encountering reservoir quality strata with sufficient connectivity has historically been the crux to unlocking the Brookian potential on the North Slope.”

ARCO drilled the Itkillik River Unit No. 1 to 15,321 feet in 1972, attempting nine drill stem production tests and taking three conventional core samples from the well. The deepest of those tests — at an interval in the Kekiktuk formation between 14,510 and 14,726 feet — flowed at an estimated rate of 3,500 cubic feet per day over six hours.

Phillips Alaska drilled the Atlas No. 1 well and Atlas No. 1-A sidetrack to 7,335 and 8,454 feet respectively in 2001, finding hydrocarbon-bearing zones in the Torok Formation but not gathering fluid samples or conducting production tests at either well.

Pioneer Natural Resources Alaska drilled the Cronus No. 1 well to 7,941 feet in 2006 to explore a Brookian sourced target in the Torok formation similar to the Atlas wells.

Cronus No. 1 encountered two zones in the Torok formation that appeared to be hydrocarbon bearing, but Pioneer ultimately decided they were too tight to produce.

Under the agreement for the new Putu unit, BRPC must post a $10 million performance bond by Feb. 1, 2012, to guarantee that it will commit to a four-well drilling program.

The first payment of $1 million is due on May 31, 2012.

The company must then drill four wells into the Upper Jurassic-age strata of the Kingak formation by May 31, 2013, two targeting the Musketeer trend (Brookian Sequence Boundary C) and two targeting the Big Foot trend (Brookian Sequence Boundary BC).

S Miluveach and Kachemach

BRPC applied to form the Southern Miluveach unit in December 2010 and DNR deemed the application complete in late June after the company submitted two revisions.

The original proposal covered some 60,864 acres over 40 leases, including 11 owned jointly by the state and ASRC, a mile to the northeast of the new Tofkat and Putu units.

The initial application proposed six exploration blocks: Northeast, Southeast, Northwest, Southwest, West and South. The state ultimately created the Southern Miluveach unit out of the Southeast block and the Kachemach unit out of the West and Northwest blocks.

The Southern Miluveach unit now includes five state leases covering some 8,960 acres, while the Kachemach unit includes 11 state/ASRC leases covering some 16,487 acres.

The leases not included in either unit will expire at the end of their terms.

DNR also increased the rental rates on 18 leases in the Kachemach unit and five leases in the Southern Miluveach unit to $4.50 per acre from $3 per acre to make up for the lost revenue it might have collected by leasing the acreage out to another company.

Oil shows in the Torok

The first wells drilled in the area — the Colville No. 1 in 1966 and the Kookpuk No. 1 in 1967 — targeted Lisburne formation, but considered it unsuccessful after an evaluation.

The Kuparuk River unit to the east produces from the Lower Cretaceous-age Kuparuk River formation at the Kuparuk PA and the shallower Upper-Cretaceous Bermuda sands of the Seabee formation at the Tarn PA. The Colville River unit to the west produces from the Jurassic-age Alpine and Nechelik sands in the Kingak formation, from the Lower Cretaceous-age Kuparuk C sand and from Upper Cretaceous-age Nanuq sands in the Torok formation and shallower Qannik sands of the Nanushuk formation.

ARCO drilled the Colville River No. 1 well to 7,300 feet in 1993. Although the original objective in the Cretaceous-age sands of the Kuparuk formation proved to be unsuccessful, the company did encounter “weak oil shows” in the Torok formation.

ConocoPhillips drilled the KRU-2L-03 well as an exploration step out from the Tarn 2L drill site in 2002, reaching a bottom hole location in the southeast corner of the Southern Miluveach unit at 11,316 feet to target Kuparuk C sand, but later gave up the lease.

ConocoPhillips drilled the Oberon No. 1 well eight miles west of KRU-2L-03 in 2003 to 7,580 feet targeting the Kuparuk C sand and the Alpine sands in the Kingak formation.

BRPC participated in the Ataruq No. 2 and Ataruq No. 2A well and sidetrack that Kerr McGee drilled in the proposed unit area in 2005 to 7,400 feet and 11,242 feet respectively to target Cretaceous-age Brookian submarine fans and the deeper Lower Cretaceous Kuparuk formation before reaching a total depth in the Miluveach formation, encountering oil shows in the Brookian formation but not in the Kuparuk formation.

The 2008 seismic survey covered the western half of the original Southern Miluveach unit and this year BRPC acquired a license for an earlier survey covering the eastern half, identifying potential stratigraphic traps in both the Brookian and Kuparuk formations.

BRPC drilled North Tarn No. 1 in early 2011 to 6,223 feet, identifying an oil reservoir in the Kuparuk C sand in the SE Block. BRPC also believes there could be a potential accumulation in the Nanushuk formation in the W and NW Blocks. The Nanushuk produces oil at the Qannik sands of the Colville River unit 11 miles west of the unit.

Six wells in the two units

Under the agreement for the new Southern Miluveach unit, BRPC must complete three wells — the North Tarn No. 1-A well, the Mustang No. 1 well and the Mustang No. 2 well or sidetrack — into the Kuparuk formation by May 31, 2012, and the working interest owners must sanction the Mustang development project by Oct. 1, 2012.

The Kachemach unit is now divided into two exploration blocks, Block A and Block B.

Under the Kachemach unit agreement, BRPC must complete one well in Block A targeting the Caribou trend (Brookian Sequence Boundary F) and one well in Block A targeting the Moonlight trend (TP4-2 Nanushuk prospect) by May 31, 2013.

If BRPC meets those commitments the company must then commit to complete one well in Block B targeting the Moonlight trend (TP4-1 Nanushuk prospect) by May 31, 2014.

Adds to other units

The two decisions make BRPC the operator of five units on the North Slope.

In addition to the four new units, DNR approved the formation of the 52,876-acre Beechey Point unit in the Gwydyr Bay region north of Prudhoe Bay in September 2009.

Earlier this year, BRPC also applied to form the Greater Bullen unit in the area between the Point Thomson and Badami units on the eastern North Slope, but recently withdrew that application and announced plans to apply for a smaller unit in the area next year.

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