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Vol 21, No. 33 Week of August 14, 2016
Providing coverage of Alaska and northern Canada's oil and gas industry

ASRC advancing Placer

Exploration well looks promising; company wants time to plan development

ERIC LIDJI

For Petroleum News

ASRC Exploration LLC is hinting at promising results from its first exploration well, and asking the state for a little breathing room as it proceeds with work at the prospect.

In a letter to state officials, the subsidiary of Arctic Slope Regional Corp. suggested that the Placer No. 3 well expanded the known size of the reservoir and appears to be capable of producing economically. The company wants a five-year extension to the terms of its Placer unit on the North Slope citing both the recently completed well and previous permitting delays that prevented it from pursuing its exploration activities sooner.

The extension would give the ASRC Exploration until Sept. 8, 2021, to complete a plan of work for the unit. Without the extension, the unit would expire on Sept. 9 of this year.

According to a July 26 letter to the Alaska Department of Natural Resources and an associated plan of development, the well “confirmed extension of the Placer reservoir beyond the central Placer No. 1 location.” As of now, the Placer No. 3 well only identified one productive interval at the unit. But the company intends to determine, at a later date, whether other zones at the unit also have the capability to be productive.

Now ASRC Exploration is proposing a plan to move toward development. The two-year program would “re-evaluate and incorporate new seismic into our model to complete geological mapping of the area; perform reservoir engineering for reserves estimates; perform facilities engineering for a development plan; and perform economic evaluations with the goal to sanction the project development,” according to the company.

Between September 2016 and September 2017, ASRC Exploration would undertake early development activities. The company would use information from all three existing Placer wells to estimate the “extent, size and continuity of all producible reservoirs.” It would obtain information from the “CGG Tabasco 3D seismic” and merge the findings into other seismic surveys to better map the geologic structure. It would develop a high-level cost estimate for infrastructure. And it would start discussions with Brooks Range Petroleum Corp. and ConocoPhillips Alaska Inc. about sharing existing facilities.

Between September 2017 and September 2018, the company would use the results of its reservoir mapping to plan future development wells, begin engineering work for drilling pads, roads and pipelines, and propose the first participating area for the unit.

A five-year extension would allow ASRC Exploration to complete this two-year program and prepare a new work plan in 2018 without the threat of losing the unit or its leases.

The Division of Oil and Gas is accepting comments on the request through Sept. 3.

Hunch confirmed?

Although well results are scarce, the details are telling.

A major point of contention between ASRC Exploration and the state Division of Oil and Gas in previous years was how much acreage the company needed to explore the region.

When the company initially requested the unit in early 2011, it wanted to include four state leases covering some 8,769 acres. But later that year, the state approved a 1,480-acre unit covering portions of those leases - restricting the unit boundaries to the area immediately around Placer No. 1. After reprocessing some seismic information over the region, ASRC asked the state to expand to unit to the original boundaries, arguing that any well drilled within the smaller boundaries would be a “twin” of Placer No. 1.

After several rounds of administrative decisions and appeals, the state ultimately approved the larger unit boundaries in late 2014. Earlier this year, ASRC Exploration finally drilled and completed the Placer No. 3 well. By saying that the well “confirmed extension of the Placer reservoir beyond the central Placer No. 1 location,” the company was suggesting that it was justified in its request to include more acreage in the unit.

In addition to hinting about the reservoir size, ASRC provided another glimpse into its results by telling the state it intended to apply for the well to be certified of capable of producing hydrocarbons in paying quantities, which can be used to extend certain leases.

When ASRC Exploration first took an interest in Placer, as part of an “apprenticeship” to learn more about Arctic oil and gas operations, the prospect was included in the Kuparuk River unit. ConocoPhillips operated a two-well exploration program in early 2004 on behalf of a consortium of companies, including a 35.7 percent interest for ASRC Exploration. But the Placer No. 1 and No. 2 wells ultimately did not justify development.

ASRC Exploration acquired the prospect through a state lease sale in 2006, after the leases were contracted from the Kuparuk River unit. By the time the company officially acquired the Placer No. 1 well in mid-2010, the leases were only a year from expiring. The original unitization request was an attempt to preserve the leases for exploration work.

‘Billion-dollar fairway’

The Placer unit is nestled between the Kuparuk River unit to the east and the Colville River unit to the west. ARCO Alaska Inc. referred to the region as the “billion-dollar fairway” because of the presumed quantities of oil contained between the giant fields.

In recent years, independent operators Armstrong Oil & Gas and BRPC have been pursuing the opportunities in that fairway. While Armstrong in still early in the development process at the Pikka unit to the northwest of Placer, BRPC is nearing startup at the Southern Miluveach unit to the south - and that creates an opportunity.

For a time, ASRC Exploration wondered if the Placer reservoir might extend far to the south, and entered negotiations with BRPC to jointly explore and develop Placer.

Those negotiations petered out, but the companies could still partner.

The Alaska Industrial Development and Export Authority partially financed much of the initial infrastructure investments at the South Miluveach unit, including its processing facilities. One reason the public corporation was interested in the project was the opportunity to improve the economics of other projects in the fairway, including Placer.



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