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Vol. 11, No. 40 Week of October 01, 2006
Providing coverage of Alaska and northern Canada's oil and gas industry

NPR-A sale nets $13.9M

BLM receives bids on almost one million acres from four companies

Kristen Nelson

Petroleum News

The U.S. Bureau of Land Management received 87 bids on 81 tracts at its Sept. 27 oil and gas lease sale in the northwest planning area of the National Petroleum Reserve-Alaska, $13.8 million in high bids. More than $10 million, 75 percent of the total, was from a partnership of FEX LP and Petro-Canada Alaska, the two companies who, bidding separately, were the largest bidders in the first northwest planning area sale in 2004.

The U.S. subsidiary of Calgary-based Talisman Energy, FEX (then bidding as Fortuna Exploration LLC), and Petro-Canada Alaska, the Alaska subsidiary of Calgary based Petro-Canada, collectively bid $40 million in the 2004 NPR-A northwest sale. FEX bid $26.5 million, Petro-Canada $13.6 million, 49 percent and 25 percent respectively of the $53.9 million bid at the earlier sale.

FEX and Petro-Canada, bidding as 60/40 partners, took some 562,000 acres in the Sept. 27 sale, 60 percent of the 939,867 acres which received bids, paying a total of $10.4 million, an average of almost $18.50 an acre. FEX/Petro-Canada also had the high bid, at $201.03 an acre for tract 272, a total of $2,280,100 for that tract, which is adjacent to a tract for which FEX paid $5.09 an acre in BLM’s 2004 northwest NPR-A lease sale.

The companies’ bids were on tracts south and west of a large block on the northeastern edge of the sale area in which both companies took acreage in the 2004 sale. The new tract acreage extends as far west at Atqasuk. In the north the companies filled in north and east of 2004 tracts.

FEX has shot 3-D seismic

Richard Garrard, a FEX geoscientist based in Alaska, told Petroleum News after the sale that the company shot 3-D seismic in the sale area last winter. The company has some 100 percent acreage in NPR-A northwest and some that has been cross-assigned to Petro-Canada, Garrard said.

The NPR-A was initially explored by the federal government and “they were going for a specific type of objective.” Today, he said, companies “have the advantage … of a different type of technology, particularly 3-D seismic.” With 3-D, he said, it is possible to see objectives that wouldn’t have been visible to experts 20 or 30 years ago.

Garrard said they shot proprietary seismic in NPR-A last winter.

As for working on these tracts, first they have to be issued and then you have to do environmental and archaeological studies before any drilling can be done. “It’s too late for this season,” he said. Studies would have to be done and if they are favorable, the earliest you could work in this area would be 2008, he said.

FEX/Petro-Canada took all 48 tracts on which they bid.

Anadarko, Conoco bid in south

Anadarko Petroleum was the next largest bidder, with high bids of $2.38 million on 25 tracts, more than 286,000 acres, for an average of $8.32 per acre. Anadarko focused its bids on tracts in the southeast corner of the sale area, an area where it took two tracts in the 2004 sale. It also took a block of four leases in the south-central portion of the sale area. Anadarko bid on 31 tracts, losing six to ConocoPhillips.

ConocoPhillips Alaska had $1 million in high bids for eight tracts in the south-central area of the sale, 91,624 acres at an average price of $10.91 per acre. The company has a large block of leases from the 2004 sale in the southwest of the planning area, and Erec Isaacson, ConocoPhillips Alaska vice president of exploration and land, said after the sale that the company was extending that area to the south. “We’re happy with what we got,” he said, “we got all the blocks that we bid on.”

He noted the relatively few overlapping bids in the sale reflected “a lot of diverging opinions” about the sale area.

Isaacson said there is a lot of old information on the acreage, and said ConocoPhillips has “a lot of work ahead of us.”

“There’s frontier areas of the NPR-A, just like there’s very mature areas of the NPR-A, so we’ll have work in front of us,” he said.

As to whether the company might shoot 3-D seismic in the area, Isaacson said it would depend on where on its North Slope acreage ConocoPhillips decides to do work this season. There are “a lot of challenges exploring in Alaska” and the southern portion of the NPR-A northwest planning area is a long way from infrastructure, making everything the company does there more difficult, he said.

Then there are the political issues. There is a gas reserves tax on the November ballot, and “with something like that, if you’re exploring in this western NPR-A, it could crush exploration and you’re not going to want to explore at all.”

There are challenges in Alaska already, he said, and the possibility of the gas reserves tax “leaves our activity up in the air and something like that could definitely reduce our activity.”

Acting BLM Alaska State Director Julia Dougan said after the sale that she was pleased with the sale results. “Most all these tracts have been offered for sale before, and were passed by. … So I think it’s an indication that exploration-development in the petroleum reserve continues to grow.” She said the State of Alaska receives one-half, $6.9 million, of the bonus bids from the sale.

The sale was originally set to offer tracts in the northwest and northeast planning areas, some 8 million acres. Due to a final decision from the U.S. District Court in Anchorage on Sept. 25, tracts in the northeast planning area were withheld from the sale.

While the sale only drew four companies, in this it was comparable to the 2004 sale which had bids from the same four companies bidding Sept. 27 and from Pioneer Natural Resources Alaska, which bid with Conoco and Anadarko.

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