A partially rejected expansion of the Badami unit from several years ago continues to slow development of the eastern North Slope, according to operator Savant Alaska LLC.
In a plan of development for the unit, submitted to the state in May 2015, Savant said that an outstanding appeal and an associated request for a stay of an earlier plan of exploration “makes planning difficult for further delineating and developing the field.”
The regulatory kerfuffle started in late 2012, when Savant and the Alaska Venture Capital Group LLC asked the state to add seven leases covering some 10,121 acres to the Badami unit to incorporate the East Mikkelsen prospect. Instead, in March 2013, the Alaska Department of Natural Resources agreed to include only two of the seven leases.
The ruling also approved an exploration plan that required Savant to drill a directional well through the entire Canning formation and into the underlying Hue shale to evaluate the potential of the hydrocarbon-bearing Killian interval encountered in the earlier East Mikkelsen Bay No. 1 well. If successful, Savant would have needed to complete the well, perform an extended test and present the results of the test to the state by June 30, 2014.
Savant appealed the ruling in April 2013, saying it needed all seven leases to effectively explore the prospect. To address the pending drilling deadline, Savant also requested a stay of its plan of exploration in August 2013. Even though the company and state officials have met in the years since the appeal was filed, the matter remains unresolved.
The Tennessee-based independent Miller Energy Resources Ltd. acquired Savant in May 2014 and closed on the purchase in December 2014. A development program has been hampered over the past year by financial difficulties at the corporate level and by the decline in oil prices. Miller recently said it has an unnamed buyer interested in Badami.
In the May 2015 plan of development, Miller said it would review all potential targets outside the participating area, “including, but not limited to, the Killian Sands on the east side of the unit” and “intends to continue exploration to fully explore the unit area as economic conditions warrant, and once the unit expansion appeal issue is resolved.”
The expansion acreage has importance beyond plans for Badami. The seven proposed expansion leases occupy the entire area between the Badami and Point Thomson units.
For decades, state oil and gas officials have been dreaming about a “string of pearls” in the eastern North Slope. The idea was to use existing infrastructure to justify exploration - and eventually development - across the eastern North Slope, toward the Arctic National Wildlife Refuge, just as ConocoPhillips has been doing by expanding Colville River unit development into the National Petroleum Reserve-Alaska. With Point Thomson approaching start-up, East Mikkelsen would sit between two producing fields.
The current plan of development calls for completing work deferred from this past year.
In its 11th plan of development, from Nov. 16, 2014, through July 15, 2015, Savant had planned to evaluate hydraulic fracture stimulations on the Bl-18A and Bl-38 wells and to use those results to design stimulations for wells to be drilled in the first half of this year.
Ultimately, the company had to postpone the completion activities for Bl-18A and Bl-38 because it was unable to secure the necessary equipment and barge it to the Badami unit in time to complete the activities. The company also postponed the wells planned for earlier this year because of a similar problem with securing equipment, a desire to conduct a geological review as part of the change in ownership and current oil prices.
The state approved the 12th plan of development, which runs through July 15, 2016.
The plan calls for completing the hydraulic fracture activities and, if oil prices permit, drilling the two new wells. Because Savant made no definitive plans for the exploration acreage, the unit “remains subject to a finding of default,” according to the state.
