As Eni US Operating Co. Inc. completes its initial development program at the Nikaitchuq unit, it is beginning expansion efforts that could define the future of the field.
The Italian major expects to complete its initial development program at the North Slope field by the end of the year, but will undertake continuous drilling from its Spy Island drill site into 2015 as it pursues several opportunities. Those include a campaign to add dual laterals to existing wells, an expansion into the area just west of its existing development and evaluation of two potential developments yet to be fully sanctioned.
Eni plans to drill more than 20 wells and laterals at the nearshore unit over the next two years, according to a seventh plan of development filed with state officials in July 2014.
The schedule for the remainder of this year at the field in state waters off the North Slope, north of the Kuparuk River unit, calls for drilling four production wells with laterals, three injection wells and four multilateral sidetracks of existing wells. Over the summer, Eni drilled the Spy Island SP12-SE3 well with a lateral and drilled a lateral at the existing Oliktok Point OP16-03, according to the Alaska Oil and Gas Conservation Commission.
The 2015 program calls for drilling three production wells with laterals, four injection wells and four multilateral sidetracks, plus drilling a new water well into the Ivishak.
Multilateral drilling
Eni completed its initial drilling program from the Oliktok Point Pad in August 2012 and expects to complete its initial drilling program from the Spy Island drill site in November.
With work completed for the time being at the Oliktok Point Pad, Eni plans to cold stack Nabors rig 245 through January 2015, when the rig would be used to drill an injection well and a water sourcing well into the Ivishak formation. Eni is also considering a campaign to use the rig to workover a well it had previously drilled from the onshore pad.
The program at the Spy Island drill site would use Doyon rig 15 and a Baker RAM multilateral system. For the foreseeable future, Eni plans to drill all new production wells as multilaterals. (The company would continue to drill injection wells with single laterals.) Once the planned program is completed, around March 2015, according to the company, Eni plans to convert eight single-bore wells at the pad into multilateral wells.
Eni attributes a large jump in production recently to previous multilateral wells.
Nikaitchuq produces from the same oil-bearing sands of the Late Cretaceous-aged Schrader Bluff formation found at Prudhoe Bay, Kuparuk River and Milne Point.
The Nikaitchuq Schrader Bluff Oil Pool contains two sands: the OA and the N. Testing has also encountered minor oil accumulations in the Triassic-era Sag River sandstones.
Eni has estimated that the OA sands hold between 800 million and 930 million barrels of oil in place and expects to produce as much as 220 million using primary recovery and waterflood injection - a 30-year field life peaking at some 28,000 barrels of oil per day.
The development work to date has focused exclusively on the Schrader Bluff OA Sands, but Eni is in the process of “derisking” the shallower Schrader Bluff N Sands.
The company is also deciding whether to commission a second offshore drilling pad farther west, which would allow it to develop a reservoir in the Sag River formation.
And as it pursues those two potential developments, Eni is moving ahead on a westward expansion of the OA Sands into a section of the unit previously considered unfeasible.
Some of the work for the year is under way, although Eni is planning a 36-hour facility shutdown in late August to accommodate “critical maintenance items,” the company said.
Transitional phase
Eni is beginning a transitional phase at Nikaitchuq.
The company acquired a minority stake in the unit in 2005 and the remaining working interest in 2007 and conducted a delineation program in 2006 and 2007. The offshore field contained relatively heavy oil, which challenged the commerciality of an otherwise large discovery. To improve the economics of the project, the state agreed to expand Nikaitchuq to include Tuvaaq, and to modify the royalty structure should oil prices drop.
The modification allows Eni to pay the state a 5 percent royalty rate - rather than the most common rate of 12.5 percent - when the delivered price of Alaska North Slope crude oil drops below $42.64 per barrel, a threshold adjusted annually for inflation. The modification is available to Eni for the first 25 years of sustained production at the field.
In February 2008, Eni sanctioned a $1.45 billion development program at Nikaitchuq.
The initial program called for drilling some 73 production and injection wells by 2011, but the company later modified the plan to include some 51 wells: 11 producers and eight injectors from Oliktok Point, 15 producers and 12 injectors from Spy Island, a disposal well at each pad and three water sourcing wells into the Ivishak formation.
After slowing the pace of its development because of weather delays in conjunction with the short Arctic sealift season, Eni brought the Oliktok Point Pad online in late January 2011 and brought the Spy Island drill site online in late November 2011. As the development schematic progressed, Eni contracted two undeveloped leases from the unit.
Through the end of 2014, Eni expects that it will have drilled 53 wells at the unit, largely keeping to its earlier plan but shifting some onshore wells to the offshore drilling pad.
In June 2014, Eni reach its current peak production of 25,000 barrels per day at Nikaitchuq, a rate the company expects to maintain through the end of the year, according to its most recent plan of development. In announcing the milestone, the company said it expected to reach 30,000 bpd within the next year. The Nikaitchuq production facilities were designed to accommodate 40,000 bpd of crude oil.
Speaking about the 30,000 barrel per day goal, Eni executive Federico Arisi Rota said he was “confident we will reach this goal in the same way we have met earlier challenges.”
With the initial campaign nearing completion, Eni is beginning to apply advanced technologies to the field, specifically a multilateral and waterflood program launched last year. The program helped increase the average rate of oil production per well to 924 barrels per day, up from 565 barrels per day, throughout 2013, according to the company.
The multilateral program involves drilling laterals in “counter undulation” to existing production wells. The well and the lateral undulate in a mirroring fashion, so that the lateral curves downward where the well curves upward, which covers more formation.
The company claims that these wells, some of which have lateral sections as long as 22,000 feet, “are the most complex wells drilled by the industry to date in Alaska.”
Through the end of the year, Eni expects to have added dual laterals to 15 existing or recently drilled wells - eight from the Oliktok Point Pad, five from the Spy Island drill site and two from wells drilled as westward extensions of the Spy Island drill site.
Three expansion opportunities
As Eni advances near-term efforts to expand the use of multilateral technology, the company is also evaluating three geographic or geological expansions at the field.
The company is looking to extend its development of the Schrader Bluff OA sands into the “western area” of the unit. “Originally considered technically beyond drilling reach, this area is now considered a challenging but feasible drilling target,” the company wrote in its most recent plan of development. The project involves drilling four wells - two producers and two injectors - from the Spy Island drill site into the western flanks of the field starting this summer. According to the company, the Nikaitchuq field has documented “higher productivity” and “better fluid properties” as it moves to the west.
The plan of development fails to identify the precise extent of the “western area” development, although potential plans for a Sag River development would suggest that the “western area” stops far short of the undeveloped northwest corner of the unit.
In a Nikaitchuq plan of development filed last year, Eni proposed a second offshore drilling pad in the northwest corner of the unit to access a Sag River reservoir and said it intended to submit a proposal to its “upper management” within “12 to 18 months.”
In the current plan of development, Eni said it plans to spend the next 12 to 18 months reviewing “geological, petrophysical and seismic information” and monitoring existing and pending wells at the Nikaitchuq unit to “aid in identifying potential exploration and development opportunities, including Sag River and Schrader Bluff N sand.”
The company said it plans to submit a proposal for a Sag River development to upper management within the current 12-18 month timeframe. A development would allow Eni to retain all or part of four undeveloped leases currently included in the unit boundaries.
The Sag River at Nikaitchuq is deeper than the Schrader Bluff. Although thought to contain lighter oil than the shallower formations, the Sag River formation is “plagued with poor quality reservoir rock” and development would be “marginal at best unless there are significant advances in stimulation or enhanced oil recovery technology,” state officials wrote in a previous decision to modify the royalty structure at Nikaitchuq.
Alongside those studies, Eni is also still evaluating another proposal discussed last year.
While Eni sanctioned Nikaitchuq based on the potential of the Schrader Bluff OA Sands, the company has long discussed the possibility of developing the shallower N sand.
Eni claims to have encountered between 40 million and 100 million barrels of “contingent resources” in the N sand in 2012, which prompted the current appraisal program alongside development of the OA sands. The company conducted “sedimentological, petrophysical and reservoir studies,” extended the “toe” of several OA sands development wells and drilled a pilot well last year to test completion strategies.
Eni said that it expects those studies to be finished by the end of the year, at which point the company would decide whether to propose a “conceptual project” to management.
Infrastructure work
Aside from drilling, Eni has also been expanding its infrastructure.
The company installed the Black Gold Camp at its onshore Nikaitchuq Operations Center in the third quarter of 2013 and installed a snow fence alongside the center in early 2014 to protect against drifts in the winter. Eni started a second train at its production facilities in February 2014 and installed a permanent load bank at the facility in the second quarter.
In May 2014, Eni started a temporary chiller to re-freeze thawed permafrost at its source water well. Now, the company is working to install a permanent chiller system.
