Dec. 6 saw a robust state oil and gas lease sale for the North Slope and more modest sale results for state waters of the Beaufort Sea and for federal land in the National Petroleum Reserve-Alaska. The sale results appear to point to current oil company and investor attitudes towards oil and gas development in Arctic Alaska.
In many cases companies sought land access that fits within recent trends for oil discoveries on the North Slope. In the case of the state’s North Slope sale, bids also addressed the relatively sparse areas of land that were not already leased in the more northerly part of the Slope - the result, once the lease purchases have been confirmed, will likely be fairly comprehensive lease coverage, at least in the more northerly sector of state lands.
Following the state sales Chantal Walsh, director of Alaska’s Division of Oil and Gas, expressed her excitement at the extent of onshore state land that will now be under lease, following a lease sale that brought in the third highest bid amount in the past couple of decades.
“We’re seeing these lands potentially going forward and explorers are going to be out there and there is going to be activity,” Walsh said. “All of that speaks very highly of positive things for the state of Alaska.”
“We are excited to see the level of competition between bidder groups in this lease sale,” said Department of Natural Resources Commissioner Andy Mack. “The surge of interest from companies that have been exploring on our lands over the last decade indicates a positive direction for the oil industry on the North Slope.”
The Pikka trend
Armstrong Energy and Repsol E&P USA Inc. bid on a fairway of leases running roughly north-south, some distance south of the Pikka unit, where the two companies are planning a major development focused on the Nanushuk formation, east of the Colville River delta. The Nanushuk and Torok formations in the Brookian sequence, the youngest and shallowest of the major North Slope petroleum bearing rock sequences, have become the focus of much exploration interest, following major oil discoveries at Pikka, at Willow in the northeastern NPR-A, and at Smith Bay off the northwestern North Slope.
The leases that Armstrong and Repsol bid on appear to roughly follow the trend of what geologists term “the ultimate shelf margin,” the farthest east extent of a marine shelf system that existed when the sediments that formed the Nanushuk and Torok were laid down. The oil reservoir at Pikka consists of a sand body viewed as having been laid down by an ancient river delta system on that shelf margin.
Jason Sebastinas, Repsol’s North America senior landman, confirmed to reporters that the companies were following that Pikka trend.
It is “a great area of interest,” Sebastinas said, also commenting that Repsol’s Alaska interests form one of the company’s strategic assets.
“Alaska’s one of our focal points. So, we’re very excited about Alaska,” he said.
Independent bidding
Repsol and Armstrong bid independently on tracts in the fairway, with Repsol bidding to the south and Armstrong more to the north, and with the companies submitting competing bids for some tracts. Sebastinas said that the companies had agreed on this strategy for the sale and that, once the lease ownership positions are confirmed, the companies will offer each other shares in their newly acquired leases.
CaraCol Petroleum LLC bid on four tracts immediately southeast of the Pikka unit, perhaps with the same Pikka play in mind. Similarly, investors Andrew Bachner and Keith Forsgren successfully bid on three small tracts immediately south of Pikka. And Mayhem Energy LLC picked up a single tract in the same general area. CaraCol is involved in Brooks Range Petroleum’s Mustang oil field development, nearby to the east. According to state records, Mayhem Energy is based in Colorado and registered in Alaska in October.
South of Kuparuk
Armstrong bid on some tracts to the south of the Kuparuk River unit. These are tracts that had previously been under lease to a partnership between Armstrong, Repsol and GMT Exploration. The previous leases expired in June of this year. In 2008, after acquiring leases in the Kuparuk area, Bill Armstrong, now CEO of Armstrong Energy, told Petroleum News that his company saw many prospects in the area around the Kuparuk River unit. And, since in this year’s lease sale ConocoPhillips also bid on several tracts in that region to the south of Kuparuk, ConocoPhillips must also see potential in the region. The ConocoPhillips Meltwater satellite field lies to the immediate southwest, with a reservoir in the Seabee formation of the Brookian sequence, at a younger stratigraphic position than that of the Nanushuk and Torok.
Accumulate Energy Alaska, a subsidiary of 88 Energy, bid on a block of leases outside the western edge of a east-west lease fairway operated by Accumulate and its joint venture partner Burgundy Xploration LLC, a number of miles south of the operating oil fields of the central North Slope. This lease fairway is the focus of Australian company 88 Energy’s strategy of seeking source-rock oil plays in that more southerly region, where much of the oil found in the North Slope oil fields is thought to have been generated. There are also conventional oil plays in the region, 88 Energy has said.
Regenerate Alaska Inc., another 88 Energy subsidiary, outbid some oil and gas investors on a small block of leases immediately west of the 1002 area of the Arctic National Wildlife Refuge. These leases are well north of 88 Energy’s existing lease fairway. There is intense interest at present in the possibility of the 1002 area being opened for oil and gas exploration, as part of a tax bill currently being worked in the U.S. Congress.
Investors Douglas Barr and Dan Donkel picked up a lease on the immediate east side of the Prudhoe Bay unit.
Beaufort Sea and NPR-A
Small investors dominated the Beaufort Sea lease sale. Bachner and Forsgren, and Samuel Cade and Dan Donkel, successfully bid on a scattering of leases adjacent the ANWR 1002 area, and on the seaward side of the nearby Point Thomson unit. Groupings of investors also bid on couple of other leases: one inshore of the Endicott field and another on the north side of the Prudhoe Bay unit. Bachner and Forsgren picked up a single lease, offshore to the north of the Pikka unit, and a block of leases to the north of the Colville River unit.
Armstrong was the high bidder on a single tract off the northwest corner of the Oooguruk unit.
In the NPR-A lease sale ConocoPhillips Alaska and Anadarko Petroleum bid on seven tracts on the southwestern border of a large block of leases that the companies already hold in northeastern NPR-A. Presumably the companies are continuing a strategy of progressively moving out into the NPR-A from the Colville River delta, building out the support infrastructure in steps, starting with the CD-5 development, followed by Mooses Tooth 1, Mooses Tooth 2, and so on. ConocoPhillips has announced its major NPR-A oil discovery in the Nanushuk at Willow, some 30 miles to the northeast of the tracts that the companies have now bid on for leasing.
ConocoPhillips has said that it has been meeting with success in using advanced seismic survey techniques to identify subtle oil prospects in the northeastern NPR-A region.
Although in the NPR-A lease sale the Bureau of Land Management offered a huge number of land tracts, many of the tracts are in regions very far from the nearest infrastructure: Presumably viable oil development in these remote regions would require a very large find. And, although the productive Nanushuk/Torok play is thought to extend across much of the region, the exploration uncertainty is relatively high in the more inland and western areas. The unleased portion of NPR-A that is thought most prospective lies along the coast, following a major geologic structure called the Barrow Arch that tends to act as a focus for oil migration. However, under the current NPR-A Integrated Activity Plan, the coastal region west of where ConocoPhillips is currently operating is off limits to oil and gas leasing because of environmental concerns.
