To date, Great Bear Petroleum Operating LLC has drilled three exploration wells and commissioned five 3-D seismic surveys on a patch of acreage in the central North Slope.
That disparity highlights the challenges the company has faced as it tries to understand the potential for developing source rocks in the region south of the Prudhoe Bay unit.
The Alaska-based independent only completed one well in a three-well program planned for 2015. This year, after Gov. Bill Walker vetoed tax credits in 2015, the company postponed a re-entry of the well until 2017 and instead commissioned more seismic.
Great Bear hired Geokinetics Inc. to collect seismic data from about 450 square miles immediately south and southwest of Deadhorse. The program targeted potential “sweet spots” for source rock development as well as conventional oil prospects in the area.
Two goals
Those two objectives reflect an expanded strategy.
When Great Bear purchased its initial 500,000-acre leasehold during a state sale in 2010, the company was eager to bring Lower 48-style shale development to Alaska. The oil contained in prolific North Slope reservoirs had to originate somewhere and studies had suggested it might be the stacked source rocks to the south. The company planned to use horizontal drilling and hydraulic fracturing to develop all three source rocks at once.
Using the year-round access provided by proximity to the Dalton Highway, Great Bear identified six locations and drilled two wells in the summer and fall of 2012. The smaller program was the result of a later than expected start and the end of a rig contract.
The program yielded some 650 linear feet of rock core collected from source rocks. The company also collected 3-D seismic, which was intended to identify the best places to drill into source rock but also found some conventional opportunities worth pursuing.
Because the company was working in a region with relatively few prior exploration activities, Great Bear prioritized additional seismic activities that would expand and screen its inventory of high-impact prospects across the leasehold, Great Bear Executive Vice President Patrick Galvin told the Alaska Oil and Gas Congress in September 2015.
Great Bear completed a second, third and fourth 3-D seismic survey in 2012, 2013 and 2014. The company also assembled a team of geoscientists to compile a massive database of geologic data to help identify potential sweet spots for source rock development. The company has also been using light detection and ranging, or LIDAR, surveys to develop detailed topographic maps for the planning of surface developments such as ice roads.
New approach
The current goal is to organize a multi-well drilling program that would achieve some economies of scale. The end result might be several development projects, Galvin said.
Some aspect of that program seemed to be the intention behind a three-well program Great Bear proposed in late 2014. The wells - Alkaid No. 1, Phecda No. 1 and Talitha No. 1 - were explicitly targeting both conventional and unconventional opportunities.
By the time Great Bear started drilling the Alkaid No. 1 well in mid-February 2015, completing the full program seemed to be unlikely by the end of the winter season. The company first reduced the program to two wells and later reduced it further to just one.
(The Alaska Oil and Gas Conservation Commission proposed a $20,000 fine against the company for failure to pressure test the casing of the well. The company appealed.)
With an uncertain program, and no development to provide cash flow, Great Bear has been particularly reliant on tax credits and has been a vocal advocate for the program.
Even with that dependence, Great Bear claims there is a myth that explorers are freeloading. The company has spent some $220 million, of which $140 million will be reimbursed through tax credits and $80 million can only be recovered through development.
That leads to an economic puzzle.
Great Bear has described an “Alaska Shale Play Catch 22,” where source rock exploration activities are prohibitively expensive but will only get cheaper if enough companies conduct similar work to create economies of scale among providers. By conducting a multi-well program, Great Bear hopes to achieve those efficiencies.
Alongside the strategic changes, Great Bear had an administrative change in 2015 when Ed and Karen Duncan left the company and Mike Mason took over the leadership spot.
