In the final weeks of 2016 and the first few months of this year, Eni U.S. Operating Co. LLC took early steps toward launching an exploration program at its Nikaitchuq unit.
The program would focus on targets in the Nikaitchuq North field, in the federal waters north of the offshore Nikaitchuq unit in Harrison Bay, north of the Kuparuk River unit.
The first indication of the project came in May 2016, when U.S. Bureau of Safety and Environmental Enforcement Alaska Director Mark Fesmire told the Society of Petroleum Engineers that the company was considering an exploration project north of Nikaitchuq.
Eni applied for a unit in the region in late December 2016 and the BSEE approved the Harrison Bay Block 6423 unit in late February 2017. The unit includes 13 federal leases in the waters immediately north, northeast and northwest of the existing Nikaitchuq unit.
In early March, the local subsidiary of the Italian major submitted a proposed exploration program to the U.S. Bureau of Ocean Energy Management. Although the federal agency was required to determine the completeness of the application within 15 days, it had yet to publicly announce any decision about the application by the end of March 2017.
For years, Eni has held a working interest in a block of 29 federal leases north of the unit, in the Arctic Outer Continental Shelf. Of those, two will expire in July 2017 and the rest will expire in December 2017. The leases are outside of the region that the Obama Administration withdrew from oil and gas activities in late 2016. Eni holds a 40 percent interest in the leases, with Shell holding 40 percent and Repsol holding 20 percent.
The Nikaitchuq North program would likely involve extended-reach wells drilled from the existing Spy Island Drill Site, which the company has been using for years to target the outer reaches of the unit. The wells in the new exploration program could be among the longest extended-reach wells ever drilled, according to the Fesmire presentation.
Expansion opportunities
The proposed project follows a year when Eni suspended development drilling activities at Nikaitchuq and reduced its workforce in Alaska in response to low oil prices.
But even though the Nikaitchuq North project appears to be at least partially motivated by pending lease expirations, it fits into a larger company strategy of shifting the Nikaitchuq unit into a new phase of operations. Eni recently completed its initial slate of drilling activities at the unit and is looking for opportunities to expand its operations.
The opportunities are partly exploration and partly development in nature. They include aerial expansion, developing new formations and improving the design of existing wells.
On the agenda for this year is the East Extension Project, which the company launched in the third quarter of 2015 but suspended last year. The project would follow the West Extension Project that the company conducted from the third quarter of 2014 to 2015.
All development activities to date at the Nikaitchuq unit have targeted the Schrader Bluff OA sands. But Eni has floated the idea of targeting other intervals and formations.
One potential is the shallower N Sands. After preliminary studies suggested between 40 million and 100 million barrels of “contingent resources” in the N sands, Eni drilled an appraisal well in 2013 and hopes to return this year to test a new completion technique.
A less immediate prospect is the Sag River formation at the unit.
Sag River oil is deeper and generally lighter than Schrader Bluff oil, but the formation is “plagued with poor quality reservoir rock” and would be “marginal at best unless there are significant advances in stimulation or enhanced oil recovery technology,” according to the company. In a July 2014 plan of development, Eni said it intended to submit a proposal for a Sag River development to upper management within 18 months. But the company left the Sag River project out of its 2015 and 2016 plans for development.
Minimal exploration
Eni has never been a major explorer in Alaska. Even its current development activities at Nikaitchuq are built upon the prior exploration efforts of other oil and gas companies.
Aside from a stint in Cook Inlet in the late 1960s through its affiliate Agip Petroleum, the company arrived in the state in 2005 when it acquired a minority interest in several properties operated by Armstrong. Eni expanded its interest in those prospects over the following years, becoming the owner and operator of Nikaitchuq and a minority owner of the Oooguruk unit, which is currently operated by Caelus Natural Resources Alaska LLC.
Early on, Eni showed an interest in exploring other leases it had acquired in Alaska, including the Maggiore and Rock Flour prospects south of Prudhoe Bay and Kuparuk River. The company explored both prospects in 2007 and relinquished both prospects in 2010. If federal authorities classify the current Nikaitchuq North as exploration, it would technically be the first exploration drilling in Alaska for Eni since the 2007 campaign.
