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Week of August 26, 2012
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Fortune Hunt Alaska 2012: Intriguing possibilities in Chukchi

Sherwood reviews geologic features that have lured explorers to North Slope’s continental shelf

Alan Bailey

Petroleum News

When the U.S. Minerals Management Service held its Chukchi Sea lease sale in February 2008, the agency collected about $2.6 billion in high bids on some 488 tracts. In fact, together with the two other Chukchi lease sales that MMS conducted in 1988 and 1991 MMS has raised about $3.1 billion in bonus bids from the Chukchi, MMS geologist Kirk Sherwood told a meeting of the Alaska Geological Society on Nov. 13, 2008.

So what’s the big deal when it comes to oil and gas interest in this remote and weather-challenged region?

Essentially, an abundance of large geologic structures combined with a suite of rocks that is similar to those in the prolific petroleum province of Alaska’s North Slope, Sherwood said.

“The Chukchi is structurally complex and because of that there are a lot of prospects,” Sherwood said. “We’ve got about 850 that we’ve mapped out.”

Of those prospects that MMS has identified, 83 are larger than 40,000 acres in extent, thus making them comparable in size to some of the North Slope oil fields, Sherwood said. And if any of those prospects hold oil and gas, they may be large enough for viable development.

“Our studies have indicated that for the large pools out there we do see tolerable development economics, despite the high cost of operating in that harsh environment,” Sherwood said.

Three sequences

There are three major sequences of rocks in northern Alaska: Each sequence is associated with a major petroleum system and all three occur under the Chukchi Sea.

The first of the sequences, known as the Ellesmerian, involves rocks deposited southwards from an ancient landmass to the north of what is now the Beaufort Sea coast, from late Devonian through Triassic times. The Ellesmerian sequence includes the reservoirs for the Prudhoe Bay, Lisburne and Endicott fields. Sediments of the Ellesmerian sequence accumulated in a basin termed the Arctic Alaska basin that extends east to west under what is now the southern North Slope and Brooks Range Foothills and which extends west under the Chukchi Sea, where it veers northwest into what is known as the Hanna Trough.

The next sequence, known as the Beaufortian or rift sequence, resulted from the breaking apart or rifting of the Canada basin of the Arctic Ocean in Jurassic and early Cretaceous times. The rifting resulted in the formation of fault blocks, with sagging blocks between higher blocks. Deposition of sand into the sags gave rise to reservoir quality sandstones. The Kuparuk River, Alpine, and Milne Point fields, among others, involve Beaufortian reservoirs.

The rift sequence is associated with the formation of the Barrow Arch, a major structural high that extends along the Beaufort Sea coast and that guided the migration of petroleum to major oil fields such as Prudhoe Bay. The Barrow Arch extends west under the Chukchi Sea, where it bifurcates into two arches. One of these arches extends northwest, before veering to the southwest. The other arch veers southwest immediately, to pass near the center of the U.S. sector of the Chukchi.

The third major sequence, known as the Brookian sequence, formed in Cretaceous and Tertiary times as a result of the emergence of the Brooks Range. The emerging mountain range caused sediments to flow into a huge basin, known as the Colville basin, under what is now the North Slope. That basin extends west under the Chukchi. Brookian sediments also spilled out over the Beaufort Sea continental shelf and into the North Chukchi basin in the northern part of the Chukchi Sea.

Fields such as Meltwater, Tarn and West Sak are associated with the Brookian sequence.

Seismic and well data

Much of what is known about the geology under the Chukchi Sea has emanated from the approximately 100,000 line-miles of 2-D seismic that was shot in association with the lease sales of 1988 and 1991, and from the five Chukchi Sea wells that were drilled during that era, Sherwood said. The five wells were called the Popcorn, Crackerjack, Diamond, Burger and Klondike.

To some extent, the 2008 lease sale represented a rerun of the earlier sales, with 172 of the tracts leased in 2008 having been leased previously, Sherwood said. However, companies involved in the 2008 sale did not seem interested in the Brookian plays that had attracted some bids in the previous sales. But Brookian plays in what is referred to as the foreland fold belt, in the southern part of the Chukchi Sea planning area, were excluded from the 2008 sale, he said.

Nor did companies show any interest in plays in older rocks in the northeastern part of the Chukchi.

“What everyone seemed to be going for (in 2008) focused on the plays relating to the Ellesmerian and the Rift sequences,” Sherwood said. Almost all of the leases are on extensions of the Barrow Arch, he said.

And 91 percent of the high bids in the 2008 sale clustered around the Burger, Klondike and Crackerjack structures.

“That tells you where the exploration interest is being focused in the Chukchi Sea,” Sherwood said. “… They have favorable locations relative to the Chukchi oil generation kitchen and they are large prospects with opportunities that remain untested by existing wells.”

And, although the Chukchi wells did not discover any oil pools that people viewed as economic at the time of the drilling, the wells did encounter hydrocarbons.

So what exactly did the wells find that continues to spark exploration attention? And what might the companies that bought leases in 2008 be looking for?

Burger gas field

The Burger well discovered a major gas field in a 107-foot-thick, rift-sequence sandstone occupying a huge dome-shaped structure, Sherwood said. And part of the Burger structure attracted the highest single bonus bid in the 2008 sale.

“The sandstone was gas saturated with about 86 feet of pay. … Pressure data indicated a possible gas-water contact 415 feet below the depth of penetration of the well,” Sherwood said.

The well was abandoned at a depth of 8,202 feet when the drillers lost mud circulation in a tarry rock, he said.

The part of the structure most likely to be productive encompasses an area of 97,000 acres, while the area of the structure delimited by a possible spill point for the reservoir is almost 200,000 acres in extent, Sherwood said. Sherwood said that he and MMS geologist Jim Craig estimated that the Burger structure might contain 14 trillion cubic feet of natural gas, with a possible range from 2 tcf to 63 tcf. The high level of uncertainty in the estimate reflects the fact that only one well has penetrated the structure, he said.

However, if the 14 tcf estimate proved correct, that would represent a substantial increase to the 35 tcf of gas reserves known to exist in the central North Slope, Sherwood said. The Burger reservoir also contains some condensate, he said.

But one intriguing question at Burger is whether there is oil under the gas. The sidewall cores in the well showed a small, residual oil saturation, suggesting that the reservoir may have once contained oil that the gas later displaced, Sherwood said.

“That opens up the possibility of an oil ring or an oil column beneath the gas accumulation at Burger,” he said. However, an investigation of the chemical data from the well has failed to either prove or disprove the presence of an oil pool, he said.

The Klondike prospect

The Klondike well tested a structure on the east flank of the Chukchi Platform, an area on the west side of the Hanna Trough. The well drilled into the lower part of the Sadlerochit Group, the set of Ellesmerian rocks that includes the Ivishak formation; the Ivishak forms the main reservoir in the Prudhoe Bay field. Unfortunately, at Klondike the rocks equivalent to the Ivishak turned out to be barren shales, rather than the sandstone reservoir rocks that are found at Prudhoe Bay.

“This, I think, was very bad news for the concept of exploring for traditional North Slope Ivishak formation reservoirs out here in the Chukchi, on the west side,” Sherwood said.

The well did sample some oil and there is further exploration potential around the Klondike structure, Sherwood said. There may be a play where the rocks of the rift sequence thicken around the edge of the structure and there may also be a play in deeper Ellesmerian strata than those tested by the well, he said.

Crackerjack

The Crackerjack well was looking for Ivishak sandstone on the east flank of a huge, 100-mile-long elevated, faulted block, Sherwood said. Unfortunately, the Ivishak turned out to be missing at the well location and the well drilled instead into a lower unit of the Sadlerochit group. And, although Ivishak-equivalent rocks are likely present not too far from the well, experience at the Klondike well suggests that drilling into the local Ivishak would prove futile.

“Probably you don’t have a reservoir out there anyway,” Sherwood said.

But the well did encounter oil and gas in several sandstones and, as at Klondike, there are some untested exploration possibilities at the prospect. There may be deep Ellesmerian reservoirs below the Sadlerochit Group, and there may also be rift sequence reservoirs on the flanks of the faulted block.

“The well itself penetrated a thin rift sequence but there were no sandstones associated with it,” Sherwood said.

But the Burger, Klondike and Crackerjack wells lie right in the area where oil is likely to have flowed into reservoir rocks. And the findings from the Chukchi Sea wells dispelled worries that the rocks might have become overheated as a result of deep burial at some time in the past — that was a big concern during the Chukchi exploration that took place 20 years or so ago, Sherwood said.

“We had a fear, and I think industry to a certain extent shared that fear, that we’d go out there and find a bunch of smoking cinders where our reservoirs ought to be,” Sherwood said.

In fact reservoirs like Burger were found to be in pretty good shape, he said.



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OCS resource assessment released

In conjunction with its 2012-17 proposed outer continental shelf lease sale program, the U.S. Department of the Interior also released a 2011 OCS resource assessment.

The assessment, of undiscovered, technically and economically recoverable oil and natural gas resources outside of known OCS oil and gas fields, uses information available as of Jan. 1, 2009, and incorporates advances in petroleum exploration and development technologies, the Bureau of Ocean Energy Management said in a fact sheet on the assessment.

Mean estimates of undiscovered technically recoverable resources, or UTRR, for the Alaska OCS region remain relatively unchanged in comparison to the 2006 assessment, BOEM said, noting that since the prior assessment industry has spent almost $3 billion on new Arctic Alaska OCS leases, but “there has been no significant new geologic data gathered in the region and none of the leases acquired since the previous assessment have been tested.”

The agency also said that due to sparse data from the majority of the plays in the Alaska, Atlantic and part of the Pacific OCS regions, “analog plays were developed with a more subjective approach to cover the range of uncertainties associated with these plays.”

Estimates from the assessment for the entire OCS range from 66.35 billion barrels of oil at the 95 percent probability level to 119.11 billion barrels at the 5 percent probability level; the mean is 88.59 billion barrels. Natural gas estimates range from 308.28 trillion cubic feet (95 percent probability) to 544.83 tcf (5 percent probability) with a mean of 398.37 tcf.

When the figures are converted to a barrel of oil equivalent basis, 55 percent of the potential resources are in the Gulf of Mexico (87.45 billion barrels of oil equivalent) and 31 percent in the Alaska OCS region (50 billion BOE). The Atlantic and Pacific OCS regions are estimated to contain smaller volumes, 8.87 billion BOE for the Atlantic OCS region and 13.07 billion BOE for the Pacific OCS region.

The majority of the mean BOE for the Alaska OCS, 29.04 BOE, is in the Chukchi, with 13.14 BOE in the Beaufort.