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Vol. 12, No. 46 Week of November 18, 2007
Providing coverage of Alaska and northern Canada's oil and gas industry

THE EXPLORERS 2007: Alaska gets $2 million from lease sales

Kristen Nelson

Petroleum News

An Alaska investor group and a new company dominated the State of Alaska’s annual North Slope and Beaufort Sea areawide lease sales. When bids were read Oct. 24 in Anchorage by Acting Director of the Division of Oil and Gas Kevin Banks, the state had received 21 bids on 21 tracts in the Beaufort Sea sale and 18 bids on 18 tracts in the North Slope sale.

In the Beaufort Sea sale, local investors J. Andrew Bachner (90 percent) and Keith C. Forsgren (10 percent), bidding jointly, accounted for $573,996.80 of $704,482.40 bid in that sale, while a new company, Union Energy (Alaska) LLC, with an address in Switzerland, spent $449,971.20 in the North Slope sale (33.2 percent of the sale total of $1,354,828.80).

The sales didn’t draw as many bidders or as much money as earlier areawide sales.

North Slope areawide sales from 1998 through 2006 averaged $11.2 million. The first sale, in 1998, was the best of the areawide sales: it brought in $51.8 million. Beaufort Sea sales have averaged $2.6 million, with the best areawide sale drawing $7.7 million in 2006. Prior to areawide sales, however, a 1997 Beaufort sale — the first the state had held since 1992 — brought in $28 million.

The North Slope tracts sold at this sale totaled 68,480 acres, compared to an average of 325,444 acres for previous North Slope areawide sales. There were 53,120 acres sold in the Beaufort sale, compared to an average of 66,477 acres for the actual areawide sales, but an average of 103,800 acres in previous sales if the big 1997 Beaufort sale is included.

Leases due to expire

Banks said after the sale that the reason the Oct. 24 sales weren’t large is partly related to the length of time for which leases are issued, which affects the amount of land available for a sale. The state has been holding North Slope areawide sales for almost 10 years; Beaufort Sea areawide sales began in 2000.

“It’s sort of a cycle that is harmonic to the term of the leases,” he said. Lease terms range from five to 10 years, depending on the area.

“Maybe next year we’ll have a bigger sale because there will be more land that will have been relinquished over the course of the next 12 months from those leases that we offered in ’98 and also in 2000,” he said.

And, he noted, leases from Point Thomson may be available for sale next year, subject to pending legal settlement of the dispute between the state and the former Point Thomson owners.

Former Kavik unit

In the North Slope sale, Union Energy (Alaska) bid on three leases formerly in the Kavik unit east of the Haul Road. With two bids of $187,488, the company had the highest tract bids in either sale.

Chevron — bidding as Union Oil Company of California — bid a total of $327,603.20 (24.2 percent of North Slope sale bids) on five tracts which had been part of the Whiskey Gulch unit south of the Kuparuk River unit. At $34.15 per acre, three of the five leases had the highest per-acre bids in either sale.

Chevron/Unocal already hold a block of tracts to the south of Whiskey Gulch. The tracts the company bid on in this sale include two old wells, ARCO’s 2 Winter Trail and ARCO’s 1 Ravik St. The leases were formerly held by Brooks Range Petroleum Corp., operating arm of Alaska Venture Capital Group LLC.

Chevron is a major leaseholder on the North Slope and in Cook Inlet. Prior to this sale Chevron/Unocal held some 767,120 acres of state oil and gas leases. The company has some production from the North Slope and is a major producer in Cook Inlet.

FEX SW of White Hills

FEX LP bid $298,828.80 (22 percent of the sale total) on four tracts southwest of Chevron’s White Hills prospect on the southern edge of the North Slope lease sale area. These tracts are adjacent to a block of Anadarko Petroleum, Petro-Canada and BG leases, which are in the Foothills lease sale area to the south. Tract 17 contains BP’s 1 Itkillik U. well. FEX held some 203,000 acres of state oil and gas leases prior to this sale and also holds federal oil and gas lease acreage in the National Petroleum Reserve-Alaska.

UltraStar Exploration bid $173,465.60 (12.8 percent of the sale total) on two tracts between the southeastern edge of the Kuparuk River unit and the Rock Flour unit. At $33.88 per acre, these were the second highest per-acre bids in either lease sale. Prior to this sale UltraStar held some 4,500 acres of state oil and gas leases.

AVCG bid $104,960 on four tracts (7.75 percent of the sale total). One tract is south of Badami, northwest of a large block of AVCG tracts running east to south of Point Thomson. Three tracts are east of the Colville River unit in an area where AVCG has considerable acreage, and all three are adjacent to existing AVCG acreage. Tract 1051 contains the ARCO 1 Colville River well. Prior to this sale the company held some 245,000 acres of state leases.

Bachner-Forsgren dominate

Bachner (90 percent) and Forsgren (10 percent) were the dominant bidders in the Beaufort Sea sale, with 18 of 21 bids, a total of $573,996.80 for 81.5 percent of the $704,582.40 bid at the Beaufort Sea sale.

There were 21 bids on 21 tracts in the sale.

AVCG took two tracts at Bullen Point on the eastern flank of the Badami unit — the farthest east tracts sold in the Beaufort sale. AVCG bid $52,480 (7.5 percent of the sale bids). AVCG holds a large block of leases south-southeast of Badami extending across the bottom of Point Thomson to the border of the Arctic National Wildlife Refuge.

ConocoPhillips took one tract at the northwest corner of the Colville River unit on the west side of the sale area, the farthest west tract sold, for $78,105.60. The company is the operator and majority owner at the Colville River unit. Prior to this sale ConocoPhillips held some 585,000 acres of state leases; it also holds extensive federal acreage in NPR-A.

In the central portion of the Beaufort sale it was all Bachner-Forsgren: they picked up all the unleased state offshore acreage between Northstar and Nikaitchuq, 17 of their 18 tracts, and one tract off the mouth of the Colville River — farther west than other leases on which they bid — containing the old Gulf 1 Colville Delta State well. The other tracts they took run from north of Gwydyr Bay in the east — across the top of a block of leases held by AVCG and adjacent to a block of Devon leases, and all available acreage seaward of the Milne Point unit, including a lease which contains the old ARCO 1 Jones Island well. Prior to this sale Bachner held some 24,310 acres in state oil and gas leases, Forsgren 2,860 acres.

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