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Vol. 22, No. 22 Week of May 28, 2017
Providing coverage of Alaska and northern Canada's oil and gas industry

The Explorers 2017: Three wells in, Doyon remains persistent

Promising geology is encouraging the company to explore the Nenana Basin

Eric Lidji

For Petroleum News

Sometime this spring, Doyon Ltd. expects to have results from a 64-square-mile 3-D seismic survey it recently commissioned over the northern end of the Nenana basin.

The Alaska Native corporation for the Interior region commissioned the survey late last year, shortly before announcing that its third exploration well in the basin, like the previous two, had failed to discover a commercially viable hydrocarbon resource.

The work began in February 2017.

“We’re very hopeful that the results of that will prove interesting enough to drill well number four in the basin,” Doyon President and Chief Executive Officer Aaron Schutt said at the annual conference of the Resource Development Council in November 2016.

Geology, he noted, was a primary reason for Doyon’s persistence. “If we had a well where the geology was not encouraging we would not be continuing,” he said.

Doyon drilled the 11,379-foot Toghotthele No. 1 well in partnership with Cook Inlet Region Inc. Doyon operated the program and holds a 55 percent working interest in it.

A confidentially agreement between the two companies prevented Schutt from providing any specifics about the Toghotthele well, other than to note that it had been the first of the three wells to include rock samples and associated down hole data. Efforts to collect this information from the previous two wells had been prevented by outside circumstances, including later drilling schedules, a nearby forest fire and down-hole complications.

Doyon drilled the Nunivak No. 1 well in 2009 and the Nunivak No. 2 well in 2013 before completing the Toghotthele No. 1 in 2016. To allow for a potential two-well program last year, the company began permitted a potential Toghotthele No. 2 well alongside the initial well and started its summer drilling program earlier than it had during its 2009 and 2013 programs. The results of the first well halted immediate plans for the second.

In addition to recent 3-D seismic, Doyon commissioned wide 2-D surveys in 2005 and 2012, a targeted 3-D survey in early 2015 and a targeted 2-D survey in early 2016.

High hopes

Toghotthele No. 1 was disappointing in light of the hopes Doyon had expressed early on.

At a June 2016 press briefing in the middle of the drilling campaign, Vice President for Lands and Natural Resources James Mery said that previous drilling and seismic activities in the Nenana basin had established the prerequisites for a significant discovery. He pegged the program as having a 50 percent chance of finding a viable gas resource and a 25 percent chance of finding a viable oil resource. He offered estimates of 70 million barrels of oil or 200 billion cubic feet of gas in the targeted structure.

Although the abundant coal seams in the region would suggest a gas-prone basin, Doyon cites the results of soil samples and previous drilling, in addition to geologic and geophysical information from recent surveys, as signs of potential oil accumulations, too.

And the wet-gas encountered in the Nunivak No. 2 well from 2013 suggests a thermal source for hydrocarbons that could possibly include oil, rather than biogenic source.

The results of recent exploration activity are pushing Doyon further north. All three wells to date were drilled in an area between two sub-basins in the region. But a pair of 2-D seismic surveys in 2012 and early 2016, as well as the recent 3-D survey, focused on the northern end of the basin. Each of the three surveys was designed to pursue a specific area of the previous survey in greater detail in the hope of determining drilling locations.

Persistence

The current exploration program in the Nenana basin builds on unpromising exploration activities in the region by Unocal in the early 1960s and ARCO in the early 1980s.

Those early efforts were largely interesting in oil, though, and may have overlooked the natural gas potential in a region of the state with many methane-bearing coal seams.

After private industry lost interest in exploring the region, Doyon began organizing a program on its own. It formed a joint venture with the independent Andex Resources LLC in late 2001. The state issued an exploration license to Andex in mid-2002. The joint venture acquired adjacent Alaska Mental Health Trust leases in early 2003.

Despite a 2-D seismic survey in early 2005, and optimism from the companies, political uncertainties stalled the program. Andex delayed its activities in 2006 and 2007, while policymakers were debating the Petroleum Profits Tax and negotiating terms for a potential North Slope natural gas pipeline. Those efforts made no accommodation for Interior projects, and Andex had bowed out by the time the state rectified the oversight.

Doyon received a three-year extension of its license, through mid-2012, and arranged a five-party joint venture led by Denver-based independent Babcock & Brown Energy (later Rampart Energy Co.) in early 2009. The partnership drilled the 11,100-foot Nunivak No. 1 that summer. The roughly $15 million well failed to find commercial volumes of natural gas but geological information from the well intrigued Doyon.

State-backed plans to bring North Slope liquefied natural gas to the Interior and to unify the regional electrical grid again created uncertainty for the program. By the time Doyon felt comfortable continuing its work, its four partners had lost interest in the project.

Doyon continued alone. It commissioned a 2-D seismic survey in the northern end of the basin in early 2012 and drilled the 8,667-foot Nunivak No. 2 well in mid-2013.

Even though the well was failed to yield a big discovery, it provided some intriguing geologic information, including the wet-gas that suggested a petroleum system with oil.

After completing its 3-D seismic survey in 2015, Doyon intended to continue the program alone for its third well. But the company announced a partnership with CIRI in mid-2016.

Yukon Flats

Although the Nenana program has accounted for the bulk of Doyon’s exploration resources in recent years, the company is also interested in exploring the Yukon Flats.

The company owns about 1.5 million acres of subsurface lands in the area north of Fairbanks and believes the geology of the region is similar to the Nenana basin.

The program was delayed for five years as Doyon and the U.S. Fish and Wildlife Service tried to negotiate a land swap in the region. The effort failed, although Doyon later determined that its existing acreage was more promising than it had originally thought.

SAExploration conducted a 3-D seismic survey in the Stevens Village region of the Yukon Flats in the winter of 2012 and 2013, on behalf of Doyon. But Doyon subsequently put its Yukon Flats program on hold to focus its resources on Nenana.

In early 2017, the state Division of Geological and Geophysical Services published the results of the fieldwork it conducted over the Yukon Flats back in 2002, in partnership with the U.S. Geological Survey. “Test holes at Fort Yukon demonstrate the presence of coal seams in the shallow subsurface,” the DGGS wrote in its more recent report. “If coals, carbonaceous mudstones or other petroleum source rocks are present in the deeper stratigraphy of the basin, a functioning petroleum system may be present.”



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