The state has partially approved the formation of the Cosmopolitan unit.
Alaska Department of Natural Resources Division of Oil and Gas Director Corri Feige has agreed to let operator BlueCrest Energy Inc. form a unit over portions of five Cook Inlet leases known to include oil reservoirs in the Hemlock and Starichkof reservoirs but declined to let the unit include two other leases and a segment of a third, according to a June 26 decision.
Feige partially denied the request because BlueCrest did not commit to develop or delineate those additional areas of the proposal Cosmopolitan unit area, she wrote.
The approved unit covers 14,423 acres off the coast of Anchor Point. At its maximum extent, the unit boundaries BlueCrest had proposed would have covered 22,535 acres.
The approved unit includes ADL 384403, ADL 391902, ADL 391903, ADL 391904 and ADL 18790 and excluded ADL 391899, ADL 391900 and a portion of ADL 391903.
What’s next?
The initial plan of development for the unit, which runs through the end of the year, concerned state officials, who are eager to maximize development in the area.
The plan calls for offshore and onshore development.
Offshore, BlueCrest plans to drill one vertical well to test both oil and natural gas zones in the southern part of the Cosmopolitan structure at ADL 384403. The well would be plugged at the oil zones and suspended at the gas zones until facilities come online.
Onshore, BlueCrest plans to drill two oil production wells into ADL 18790, each with dual laterals, from the existing Hansen pad, with production expected in the first half of 2016. The company is also planning an onshore disposal well in late 2015 or early 2016.
The current development program called for as many as 38 wells from the Hansen pad.
Given that both ADL 384403 and ADL 18790 already have certified wells, which protect those leases against expiration, even without unitization, the state said it “has concerns about the lack of discussion in the Initial POD regarding delineation of the rest of the reservoir that underlies the other leases.” Therefore, the department only approved the initial plan of development through the end of the year and is requiring BlueCrest to submit its second plan of development by Oct. 2. “DNR expects that the second plan of development will provide specific and detailed activities and long-range plans to execute the testing, delineation, and development of the entire reservoir,” Feige wrote.
The Cosmopolitan unit is unusual in that it contains a known reservoir, where previous operators have produced oil commercially. After Pioneer Natural Resources Alaska Inc. relinquished the unit, the state sold three leases - ADL 391902, ADL 391903, ADL 391904 - at a special lease sale and imposed special work commitments on the leases.
Apache Alaska Inc. acquired those leases and sold them to BlueCrest and its former partner Buccaneer Energy Ltd. None of those companies met the work commitments.
With BlueCrest already developing the prospect, the state decided to include the three leases in the unit anyway. “If the leases expired, valuable time and loss of revenue could result if the State had to return the leases to a lease sale. To accommodate these leases for the unit, work commitments for the leases will be eliminated, yet the intended activities will be included in a comprehensive unit plan of development,” Feige wrote, noting that the leases had increasing rental rates, which should push BlueCrest to act quickly.
Five decades
Pennzoil discovered Cosmopolitan in 1967 but initial drilling results failed to convince the company to develop the field, which was relatively far from existing infrastructure.
A second exploration effort began in the 1990s, starting with ARCO Alaska and, following mergers, continuing with Phillips Inc. and then ConocoPhillips Alaska Inc.
Phillips Inc. formed the first Cosmopolitan unit over seven state leases and two federal leases in 2001 and drilled the Hansen No. 1 well directionally from an onshore pad to an offshore target. In 2003, ConocoPhillips drilled Hansen No. 1A, a sidetrack. A subsequent flow test produced some 1,000 barrels per day and 14,851 cumulative barrels.
In 2005, Pioneer Natural Resources Alaska Inc. joined ConocoPhillips on a 3-D survey covering some 40 square miles of the region. The program “provided a clear view of the perimeter flanks of an anticlinal structure, but the crestal view of the structure was obscured by a gas cloud, rendering a conclusive description of the reservoir structure unobtainable at the time,” according to information released recently by BlueCrest.
After the joint seismic program, Pioneer Natural Resources acquired the remaining working interest at Cosmopolitan and became the operator of the unit and the program.
In 2007, Pioneer drilled Hansen No. 1A-L1, another sidetrack off the original Hansen well. The “long-reach undulating lateral well” ran through the upper portion of the Starichkof 8 sub-interval of the sands and tested at 300 barrels per day. In 2010, Pioneer fracture stimulated the Starichkof interval from Hansen No. 1A-L1. An extended flow-test produced 250 barrels per day and more than 33,000 barrels, cumulatively, which the company trucked to the Tesoro refinery under a pilot program for future development.
Although Pioneer went so far as proposing a development program for Cosmopolitan, the company ultimately decided, in early 2011, to sell the field, saying that “subsequent flow test results and engineering studies indicated that the resource potential was not as large as originally estimated.” The company terminated the Cosmopolitan unit, relinquished several leases and sold the core leases and wells to Buccaneer Energy Ltd. and BlueCrest.
Even though BlueCrest held a 75 percent working interest in the venture, Buccaneer was the original operator. Together the companies drilled one offshore well using the Endeavor jack-up drilling rig before Buccaneer sold its stake to BlueCrest and filed for bankruptcy protection. BlueCrest quickly began moving toward developing the field.
