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Vol. 11, No. 16 Week of April 16, 2006
Providing coverage of Alaska and northern Canada's oil and gas industry

Undiscovered riches in Beaufort, Chukchi

Structures larger than Prudhoe Bay exist in regions that extend the prolific onshore petroleum systems of northern Alaska

Alan Bailey

Petroleum News

With Shell planning to restart drilling in the Beaufort Sea and seismic surveys planned for both the Beaufort Sea and the Chukchi Sea, this may be a good time to review the petroleum resource potential of the outer continental shelf of northern Alaska. And at the April 6 meeting of the Geophysical Society of Alaska U.S. Minerals Management Service geologist Kirk Sherwood spoke about the new MMS assessment of Alaska’s Arctic offshore region.

Sherwood said that MMS divides most of that region into two large areas, the Beaufort Sea and Chukchi Sea planning areas. The new MMS assessment has estimated a total of 104 trillion cubic feet of undiscovered technically recoverable natural gas and 23.6 billion barrels of undiscovered technically recoverable oil in these two areas combined. That represents about 79 percent of the gas and 89 percent of the oil in all of the outer continental shelf of Alaska, Sherwood said.

“We consider the Arctic offshore a pretty rich province,” he said.

But why does the MMS consider the region to be so well endowed with petroleum resources?

A prime reason, Sherwood said, is that the geology of both the Chukchi and the Beaufort outer continental shelves shares much in common with that of the highly successful onshore petroleum province of northern Alaska.

Three stratigraphic sequences

Sherwood described the three major stratigraphic sequences that characterize the onshore geology of northern Alaska and which underpin the world-class petroleum system there.

“All of these (sequences) extend in some form directly offshore into the Beaufort and Chukchi Sea planning areas,” Sherwood said.

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. But the Arctic Alaska basin also 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.

Beaufortian sags, potentially containing petroleum reservoirs, extend along the Beaufort Sea shelf north of the shoreline and across a wide area of the northern Chukchi Sea. For example, the huge Burger gas reservoir, discovered in the Chukchi Sea, is in a Beaufortian rift shoulder sag, Sherwood thinks (see “Burger delivers” in the Feb. 13 2005 edition of Petroleum News).

The rift sequence is also 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. Sherwood said that 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 into what are known as the Nuwuk and Kaktovik basins, 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.

Many structures

A second reason to view the Arctic offshore region as well endowed with petroleum resources is the abundance of fold and fault structures that could trap oil and gas.

“The offshore area is full of very complex structures that create numerous potential traps,” Sherwood said.

Sherwood showed examples of subsurface folds and faults depicted in seismic lines that have been shot offshore.

“Any seismic line you pick out there is full of all kinds of structures and, therefore, we have a lot of prospects,” he said. “… Our current inventory of mapped prospects for the Beaufort and Chukchi Sea planning areas is about 1,100.”

For example, a series of major faults slice through the thick Brookian sequence along the “hinge line” that marks the zone where the Beaufort Sea continental shelf slopes north into the Arctic Ocean.

These are “Gulf Coast-style structures, very few of which have ever been tested,” Sherwood said.

And what makes the region particularly intriguing is the size of some of the structures — more than 12 of the identified structures exceed 150,000 acres in extent, thus exceeding the size of either the Prudhoe Bay or Kuparuk River fields. There are 24 identified prospects more than 100,000 acres in size and 95 more than 40,000 acres, the approximate size of the Alpine field.

“There ought to be a fair number of large opportunities out there and we think some may be big enough that they could be economic,” Sherwood said.

Estimating the resources

Sherwood went on to overview how the MMS scientists use the geological information from offshore wells and seismic data to estimate volumes of technically recoverable resources, and then estimate how much of these resources might be economically recoverable.

The first step of the process, Sherwood explained, is to establish families of oil and gas prospects that are called plays. Prospects grouped within plays share characteristic features such as the reservoir stratigraphic sequence, petroleum charge and structural setting.

The thermal maturity of the reservoir rocks in an area can also be used to distinguish plays. For example, Ellesmerian reservoir rocks tend to transition from thermal maturities permissive for survival of oil in the northern part of the Chukchi to areas in the south where the high thermal maturity of reservoirs precludes survival of liquid petroleum — Ellesmerian reservoirs in the latter area were assessed as charged only by gas.

MMS has identified a total of 39 plays, including 24 Brookian plays, in the Beaufort and Chukchi seas planning areas, Sherwood said.

Then, within each play, geologists use seismic sections to develop an inventory of identified, mapped and sized prospects. It is then necessary to estimate the number and sizes of prospects that have not been identified, perhaps through lack of seismic coverage.

“We can never say that we know where all the prospects are,” Sherwood said.

One technique for doing this estimation in a region of sparse seismic data is to calculate the density of mapped prospects in areas that do have seismic coverage and apply that density across the entire region.

The total of mapped prospects and the total of mapped plus estimated prospects then become two ends of a statistical distribution that describes the possible numbers of prospects within a particular play. But then it is necessary to allow for the fact that not all prospects will contain hydrocarbon pools (i.e. hydrocarbons in sufficient quantity to flow to a well bore). That is done by estimating the probability of exploration success both for each individual prospect and for a play as a whole — each prospect can be modeled using whatever information about the geology is available.

Then a statistical model runs through 10,000 different combinations of estimated pool parameters to crank out tens of thousands to hundreds of thousands of possible petroleum pools. These potential or “simulation” pools can then be used to calculate statistics for probable pools within each play. This statistical analysis typically results in an average of about a couple of dozen predicted pools for each play, Sherwood said.

Economic assessment

But, although this type of analysis predicts large volumes of technically recoverable resources in the Beaufort and Chukchi seas planning areas, how much of this resource might viably be recovered? The remoteness, sea ice and harsh climate of the Beaufort and Chukchi have tended to limit interest in oil and gas exploration in these regions.

For an economic assessment the MMS commercial analysts modeled the type of infrastructure needed to develop the offshore resources. The assumed infrastructure included offshore platforms, subsea pipelines and onshore pipelines connecting to the existing pipeline infrastructure. The assessment also assumed the existence of a gas export pipeline from the North Slope.

For each of the simulation hydrocarbon pools developed by the geologists the analysts applied an engineering simulation and, thus, estimated a cost and revenue scheme that was processed through a discounted cash flow model. Further statistical analysis of all the simulation pools then produced plots of economically recoverable resources across ranges of potential oil and gas prices.

The result: resources in the Beaufort Sea planning area start to become economically recoverable at about $22 per barrel for oil and $3.33 per thousand cubic feet for natural gas, Sherwood said. But significant economically recoverable volumes of oil do not start to appear until price levels of between $40 and $50 per barrel are attained. A price-supply curve for gas appeared to indicate the need for prices in the range of $6 to $8 per thousand cubic feet for significant recoverable volumes of gas. Price thresholds for the Chukchi are about one-third higher, Sherwood said.

So, what does all that mean in terms of the potential future development of these remote regions? Alaska North Slope crude has been trading at between $55 and $65 for the last six months, Sherwood said.

“If you think that’s the way it’s going to continue into the future, you can see that there are substantial quantities of oil and gas that could be economically recoverable from the Beaufort Sea,” he said. And at current prices there are also substantial recoverable volumes under the Chukchi.



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