The state’s newest oil and gas player, Oil Search, officially took over Armstrong Energy’s Alaska headquarters in Anchorage on April 1, per Keiran Wulff, the company’s top Alaska executive, and has leased additional space in preparation for hiring 110 people versus its original plan to bring on 50 new employees.
The ASX-listed publicly traded Oil Search with offices in Sydney, Australia, and Port Moresby, Papua New Guinea, still hopes to drill next winter on the North Slope leases it now operates, Wulff told Petroleum News, providing the company can obtain all the necessary permits and approvals.
Oil Search continues to conduct interviews in Anchorage, looking for engineers, geologists and other professionals with North Slope experience.
The company secured Armstrong and its minority partner’s interests at and near the Pikka unit, including adjacent Horseshoe leases, in late October. Per the March 25 issue of Petroleum News, Oil Search received its final regulatory approval connected to acquiring a controlling interest in the leases on March 15, the final step in assuming operatorship.
In addition to taking over Armstrong’s Suite 301 in Peterson Towers, Oil Search leased an adjoining suite and per Wulff, “may also take some space on the second floor.”
When asked about planned seismic activities on the acreage the company now operates, Wulff said, “We aren’t undertaking seismic acquisition activities. We are compiling our data base at the current time and will undertake some reprocessing to get a consistent data platform. We may undertake activity next season but this will require confirmation with our partners.”
Where they will drill the question
Initially Armstrong and Oil Search planned to drill two appraisal wells, the Pikka 2 and Pikka 2A sidetrack, at the southern end of the Pikka unit in the winter drilling season that is wrapping up now, tying in their giant Nanushuk oil discoveries to the north with those in the south at the Horseshoe wildcat drilled in 2017 by then-operator Armstrong.
Pikka 2 and 2A drilling was to be conducted east of the village of Nuiqsut from surface acreage owned by Kuukpik Corp., the village corporation for Nuiqsut.
But those plans were cancelled because, among other things, Armstrong and Oil Search secured an information sharing agreement with ConocoPhillips on its Putu 2 well and sidetrack, drilled this winter a short distance from Pikka 2 and 2A.
So even though Wulff, whose official title in Alaska is executive general manager, told PN the company planned to drill next winter it is possible Oil Search will not drill the planned Pikka 2 wells, but rather decide to drill at some or all of the following locations:
1. North of Putu; depending on those well results.
2. In the Qugruk No. 7 Pikka unit well area, a well drilled in 2014 that has been the hole Armstrong and Repsol (former operator of the acreage) was most concerned about keeping confidential.
3. North of ConocoPhillips’ Stony Hill well, which PN sources say is being production tested now. A Willow lookalike that reportedly holds at least 300 million barrels of recoverable oil in the Nanushuk formation, Stony Hill is almost directly across the Colville River in NPR-A from Armstrong’s successful 2017 wildcat, Horseshoe.
There are many other possibilities, but those are PN’s guesses with the information currently available.
Development plans
Armstrong expected the first development in the Pikka unit to be online no later than 2022 and to produce about 120,000 barrels of oil per day.
The plan under Armstrong had been to develop the project, a multibillion-dollar investment, through the drilling of about 146 wells from three drill sites on the east side of the Colville River.
The major components of the project would include the construction of about 35 miles of pipeline, 25 miles of road and a central processing facility.
The development would primarily target the Nanushuk formation but was also expected to result in production from a reservoir found in Alpine C sands.
Second option exercisable until June 2019
Oil Search told analysts Nov. 1 that it paid $400 million for a 25.5 percent interest in the Pikka unit and adjacent exploration acreage and 37.5 percent interest in the Horseshoe block and the Hue shale.
The company has the option, exercisable until June 30, 2019, to purchase all of Armstrong and its minority partner’s remaining interest in the Pikka unit and the Horseshoe block (another 25.5 percent and 37.5 percent respectively) as well as an additional 25.5 percent interest in adjacent exploration acreage and 37.5 percent in the Hue shale.
Repsol continues to hold as much as a 49 percent interest in Pikka and Horseshoe acreage, depending on the lease.
Armstrong’s success with revolutionizing exploration in northern Alaska has opened up more possibilities in previously unexplored or barely explored parts of Arctic Alaska, essentially launching a rethink of the potential for finding oil and gas in the Brookian sequence, the youngest of the major petroleum bearing rock sequences.
In a presentation at the Alaska Geological Society’s annual technical conference in 2016, U.S. Geological Survey geologist Dave Houseknecht, an established expert on Arctic Alaska petroleum systems, presented compelling evidence for looking into this new play, which the agency is now doing with a reassessment of the oil reserves in the National Petroleum Reserve-Alaska.
Essentially, while rocks of middle Cretaceous age, including the Nanushuk formation, along the Beaufort Sea coast west of the central North Slope, have tended to play second fiddle to plays involving some of the older rocks of the region, the new discovery has revealed the possibility of major undiscovered oil resources along a fairway extending perhaps 100 miles west from that recent discovery, he suggested.
Houseknecht characterized the Armstrong/Repsol discovery, with up to 150 feet of net pay sandstone in a 650-foot oil column, as “pretty astounding.”
