A year ago, Eni US Operating Co. Inc. was hoping to end its drilling suspension at the Nikaitchuq unit in early 2017, pending an improvement in the price of crude oil. Even though oil prices improved some in late 2016, the rise was apparently too slight and too uncertain for Eni. The company maintained its drilling suspension through the first half of this year and delayed any new development drilling until mid-2018 at the earliest.
Instead of development drilling, the Italian-based major is planning a technologically complex offshore exploration program this winter, targeting federal acreage north of its existing Spy Island drill site. The results of the one-to-two-well Nikaitchuq North exploration project will guide development activities at Spy Island in the years to come.
Until then, Eni plans to continue its ongoing workover activities at both of its drilling pads at Nikaitchuq - the onshore Oliktok Point Pad and the offshore Spy Island drill site.
The company appears to be committed to the shift in strategy. Earlier this year, it released and demobilized Nabors rig 245, which had been working at the North Slope unit since at least early 2010. And the company contracted the new Nordic Calista Rig No. 4, which was scheduled to arrive at Nikaitchuq this fall to begin workover activities in the spring.
Under the most recent plan of development, the Nordic Calista Rig No. 4 would begin workover activities at the Oliktok Point pad in May 2018 and move to Spy Island at a later date. Additionally, Eni plans to begin converting eight existing single lateral wells at Spy Island into multilaterals and drilling three new wells no sooner than July 2018.
In preparation for the ultra-extended reach wells in the Nikaitchuq North program, Eni commissioned “major upgrades” to Doyon rig 15. It is unclear whether the company also intends to use the rig for the three new development wells in its proposed 2018 program.
The Nikaitchuq unit includes 11 leases covering approximately 21,000 acres in state-owned waters of the Beaufort Sea, immediately north of the Kuparuk River unit.
The Nikaitchuq unit produced approximately 8.3 million barrels in 2014, 8.9 million barrels in 2015, 8.7 million barrels in 2016 and 3.8 million barrels through the first half of this year, according to the Alaska Oil and Gas Conservation Commission. Cumulative production was 39.5 million by the end of June 2017.
Earlier plansBefore sanctioning the Nikaitchuq North project, Eni was considering several options for expanding its existing operations at the North Slope unit, north of the Kuparuk River unit.
After acquiring Nikaitchuq through purchases in 2005 and 2007, Eni undertook a series of administrative tasks to improve the economics of the unit - mostly adding leases and entering a royalty relief program to hedge against low oil prices - and sanctioned a $1.45 billion development program in January 2008. The company expected to bring the unit online in late 2009, but various delays pushed the actual date of first oil to early 2011.
Eni completed its initial Oliktok Point pad drilling program in 2012 and shifted to continuous drilling at the Spy Island drill site. The Spy Island program was still underway in late 2015, when Eni suspended new drilling and reduced its workforce by 10 percent.
Prior to the suspension, Eni had been considering several opportunities for expanding development at the unit beyond its initial plans. The company completed its “West Extension” in 2014 and started its “East Extension” in 2015, before the shutdown.
The company drilled the first well dedicated exclusively to evaluating future N sand development, after focusing exclusively on the O sands of the Schrader Bluff formation.
In previous years, Eni also floated the possibility of developing the Sag River formation at the unit. Sag River oil is deeper and generally lighter than Schrader Bluff oil, but the formation was “plagued with poor quality reservoir rock” and would be “marginal at best unless there are significant advances in stimulation or enhanced oil recovery technology,” according to the company. In a July 2014 plan of development, Eni said it intended to submit a proposal for a Sag River development to upper management within 18 months, but the company omitted the Sag River in its 2015, 2016 and 2017 plans of development.
In early 2013, Eni drilled the first multilateral well at Nikaitchuq. The SP22-FN1 from the Spy Island drill site had four laterals with lengths between 1,600 and 2,000 feet.
Starting in mid-2013, Eni began adding laterals to existing wells. The campaign lasted through May 2014 and added eight laterals to select wells at the Oliktok Point pad. The laterals increased the amount of drainage from the OA sands and included “alternating undulations through the OA1 and OA3 sand layers as compared to the original laterals.”
And in the third quarter of 2013, Eni began incorporating a second lateral into all new production wells being drilled from the Spy Island drill site, which yielded five dual lateral wells by the time the company suspended drilling operations at the end of 2015.
In a plan of development for 2017, Eni proposed six wells from the Spy Island drill site - one producer (SP03-FN9), two injectors (SI02-SE5 and SI06-FN8) and four laterals (SP33-W3L1, SP30-W1L1, SP16- FN3L1 and SP27-N1L1) added to existing wells. A future phase of the project would convert as many as eight existing wells to multilaterals.
Eni is continuing to list those wells as priorities for its 2018 development program. But instead of pursuing those wells over this past year, Eni has been conducting workovers.