Hilcorp Alaska LLC is permitting a new drilling pad at the Deep Creek unit to support a two-well natural gas exploration program at an undeveloped corner of the onshore unit.
The program involves building a 300-foot by 400-foot Happy Valley Middle pad and a gravel access road connecting the pad to an existing logging road and Tim Avenue. The company plans to use Saxon Rig 169 for drilling and completion activities at the pad.
Under a timeline included with the application, Hilcorp would construct the pad later this year and drill and test the first well during the coming winter. Depending on the results of the first well, Hilcorp might drill a second well this coming spring. If the exploration program is successful, Hilcorp would permit a larger development program.
The Alaska Department of Natural Resources is taking comments through Oct. 10.
Reserves suspected
The program hopes to confirm a long-held suspicion about untapped reserves at the field.
Standard Oil Company of California discovered the field in 1958 with the Deep Creek Unit No. 1 well, but never developed the discovery. Union Oil Company of California returned to the field in the early 2000s. The state and Cook Inlet Region Inc. approved the formation of the Deep Creek unit in late 2001 and approved the formation of the Happy Valley participating area in November 2004. The total unit covers some 20,000 acres but the participating area extends over a small portion at the northern end of the unit.
After acquiring seismic information over the area and drilling exploration wells, Unocal announced a discovery in November 2003, brought the unit online in 2004 at 3 million to 4 million cubic feet per day and drilled some 13 wells by 2009. The discovery justified extending the Kenai Kachemak Pipeline and until the development of the North Fork unit, the Deep Creek unit was the southernmost point of the regional natural gas system.
After 2009, investment waned. In its eighth plan of development for the unit, from December 2010, Unocal offered no plans for further exploration activities, but said it was looking to farm out exploration acreage at the southern end of the unit. At the time, then Division of Oil and Gas Director Bill Barron required the ninth plan of development to include an exploration program in the area outside the Happy Valley participating area.
The requirement was an attempt to prompt exploration at the southern end of the unit, where the state believed there might be undiscovered accumulations. In a decision about the unit from 2004, the division noted: “Unocal’s interpretation of the data also indicates a potential accumulation south of the Happy Valley reservoir that Unocal refers to as the Middle Happy Valley Prospect.” A 2007 report from Netherland, Sewell & Associates estimated probable reserves of 22 billion cubic feet for the entire unit area, which also suggested the possibility of additional undiscovered reserves in the southern reaches.
By the time Hilcorp acquired the unit, the state had grown tired of waiting for exploration activity in the southern end and was threatening to contract the unit to remove those leases. Instead, the state extended the eighth plan of development to give Hilcorp time to make new plans. The extension gave the company until February 2013 or six months after closing, whichever came first, to file a new plan with exploration commitments.
Ultimately, Hilcorp made good on its promise to explore outside the existing participating area. The initial exploration activity, though, occurred just beyond the participating area boundaries, rather than in the far southern reaches of the unit. In a plan of development filed in March 2014, the company anticipated drilling a “Middle Happy Valley No. 1 well” in 2015 to target the Sterling, Beluga and Tyonek formations. In a plan of development filed in March 2015 reiterated its commitment to the program.
