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Vol. 13, No. 39 Week of September 28, 2008
Providing coverage of Alaska and northern Canada's oil and gas industry

$30.9M for NPR-A

Petro-Hunt enters Alaska, while other companies extend their positions

Alan Bailey

Petroleum News

An audible sigh of relief could be heard in the U.S. Bureau of Land Management on Sept. 24 when six companies slapped a combined total of $35.7 million in bids on the table in the long-awaited National Petroleum Reserve-Alaska lease sale. Once multiple bids on single tracts had been factored out, the estimated total in apparent high bids amounted to $30.9 million. Under the laws relating to NPR-A, the State of Alaska will receive 50 percent of the receipts from the winning bids.

Of the 450 tracts offered, bids were tendered for 150 parcels, covering an area of about 1.6 million acres. About 3 million acres are already under lease in the NPR-A, BLM said.

Deferred from 2006

The sale of leases in Northeast NPR-A had been delayed since September 2006, as a result of a court challenge by a coalition of environmental groups. BLM subsequently withdrew prospective land north and east of Teshekpuk Lake from this latest sale, which includes tracts in both the Northeast and Northwest NPR-A planning areas.

“The companies who submitted bids today have demonstrated their interest in developing new sources of oil and gas that will reduce our nation’s dependency on imported oil,” said Tom Lonnie, BLM-Alaska state director. “Development of these energy resources in the National Petroleum Reserve-Alaska will help meet America’s energy needs through domestic production.”

“We were gratified that we were able to work things out with the people that had different viewpoints about the lease sale, and we feel it was quite successful,” BLM Deputy Director Henri Bisson told Petroleum News. “This is the largest number of acres that we’ve leased in an individual sale. … We were very happy with the sale.”

ConocoPhillips Alaska, Anadarko Petroleum, Petro-Hunt LLC, Petro-Canada, FEX L.P. and Renaissance Umiat LLC all made bids, with all of these companies except Renaissance picking up tracts.

Tracts in the Northeast NPR-A planning area also factored large in the sale.

Petro-Hunt weighs in

Dallas-based Petro-Hunt snapped up a large fairway of tracts around and to the east of the Ikpikpuk River, which flows south to north up the boundary between Northwest and Northeast NPR-A. One of Petro-Hunt’s bids, on tract D-008 that straddles the Ikpikpuk River, turned out to be the highest bid of the sale, at $642,926. The company also bid six-figure sums on several other tracts along and immediately east of the river.

In addition, Petro-Hunt bid successfully on a smaller group of tracts in the east-central part of the northeast planning area.

The company is a newcomer to Alaska oil and gas leasing, at least in the modern era. According to the company’s Web site, the company is part of the Petro-Hunt Group, “one of the largest privately held energy group of companies in the world.” Petro-Hunt Group companies have working interests in and/or operate thousands of wells in the United States, mainly in southern states but also in the Williston basin of North Dakota and Montana, the Web site says.

Long Alaska association

The group is associated with the Hunt family, which has a long association with Alaska. The family already has energy interest in Alaska in the form of a partnership involvement in PacRim LP, the company that proposes to develop coal mining at Chuitna on the west side of the Cook Inlet.

Herbert Hunt, advisor to Petro-Hunt management, told Petroleum News Sept. 24 that his company’s bidding in the NPR-A lease sale reflects a continuing interest in Alaska.

“We have been involved in Alaska through the various Hunt companies for more than 40 years,” he said.

Hunt said the areas on which the company bid appeared prospective for oil and gas. Though there are plans for a gas pipeline from northern Alaska at some time in the future, the presence of an existing oil infrastructure on the North Slope made finding oil more appealing at the moment.

“I prefer the oil possibility because there’s a pipeline out there,” he said.

On the other hand, the Petro-Hunt tracts lie in very remote locations and would require a substantial find to justify development.

“It’s a frontier play,” Hunt said.

He also said that once the new NPR-A leases have been issued, his company will investigate the reprocessing of existing public domain seismic data, to try to glean more information from that seismic. Evaluating and reprocessing the seismic might take as much as a year and a half, he said.

ConocoPhillips

The more easterly group of tracts that Petro-Hunt bid on lie immediately southwest of a group of tracts picked up by ConocoPhillips Alaska. These tracts represent an extension of an existing ConocoPhillips exploration fairway around the Moose’s Tooth unit in eastern NPR-A, ConocoPhillips Land Manager David Brown told Petroleum News.

“We bought a lot of blocks right by Moose’s Tooth,” Brown said.

ConocoPhillips also bought some tracts west of Umiat, and some others around the Ikpikpuk River, immediately south of the Petro-Hunt tracts. The tracts west of Umiat are in an area that geologists consider gas prone.

ConocoPhillips relinquished 300,000 acres of NPR-A leases in 2007, following some non-commercial finds in territory distant from the existing North Slope oil and gas infrastructure. However, Brown characterized the company’s bids in this latest NPR-A sale as a response to plans for a North Slope gas line rather than a change in the company’s overall Alaska exploration strategy.

“We had a successful year last year,” Brown said. “We’re going to be active in the coming year, so we’re just putting together additional acreage as we continue to explore. We’re excited about our position in Alaska.”

Anadarko and Petro-Canada

Anadarko and its Brooks Range Foothills partners Petro-Canada and BG Alaska have already been drilling for natural gas at Gubik and Chandler, to the east of NPR-A near Umiat. In this latest lease sale Anadarko and Petro-Canada consolidated their existing lease position by successfully bidding on a swathe of tracts extending northwest from Umiat. Petro-Canada, bidding by itself, picked up another set of tracts a few miles to the southwest, presumably with further gas exploration in mind.

Anadarko’s Alaska spokesman Mark Hanley told Petroleum News that he was happy with the lease sale results.

“We bid on 16 tracts. We got 14 of the 16 we bid on,” Hanley said.

The Anadarko/Petro-Canada partnership outbid Renaissance Umiat on a couple of tracts next to Umiat, where Renaissance has been planning to do some drilling in its NPR-A leases in the Umiat oil field.

FEX

FEX, Alaska subsidiary of Calgary-based Talisman Energy, picked up a block of tracts immediately northwest of the Anadarko and Petro-Canada tracts that extend northwest from Umiat. FEX also bid successfully on three tracts interspersed between ConocoPhillips and Petro-Hunt tracts more toward the center of the Northeast NPR-A planning area.

“For us the sale was a success,” Richard Garrard, FEX’s geoscience manager in Alaska, told Petroleum News. “We’ve got a tranche of acreage with contiguous tracts.”

In 2007 FEX put its Alaska exploration drilling on pause for two years, expressing concerns about the deferral of the Northeast NPR-A lease sale in 2006, coupled with the high cost of doing business in Alaska.

However, the new tracts that FEX has purchased build on the company’s existing NPR-A acreage position and give the company another option if the company elects to recommence its NPR-A operations, perhaps in 2010, Garrard said.

Garrard said that in NPR-A FEX had shot the largest onshore 3-D seismic program that Talisman had ever undertaken anywhere and that the processing of that seismic was beginning to reach the point where the company is able to interpret the data.

“You have to permit locations in the summertime and that means that from the time that you commence acquisition of seismic to the time you can commence drilling is a three-year window,” Garrard said.

Though the acreage that FEX has now picked up is in the Brooks Range Foothills area, the company is interested in looking for oil as well as gas, Garrard said. There is an oil field at nearby Umiat, he pointed out.

“It’s a slightly different play for us,” Garrard said. “We’ve generally been focused further north.”



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