After suspending development drilling at its Oooguruk unit in May 2016, Caelus Energy Alaska LLC expressed its long-term confidence in the North Slope unit by saying it would begin drilling again “when oil prices recover and investor confidence resumes.”
Apparently, neither condition has yet occurred.
The local subsidiary of Texas-based Caelus Energy LLC planned no drilling activities at Oooguruk over the coming year, running from September 2017 to September 2018.
The forecast might be improving, though.
The company told state officials it intended to conduct a workover campaign over the current development year and had identified six new wells to pursue in the future.
Even so, the company also suggested that plans to bring the Nuna satellite into production by late 2018 could be further delayed by oil prices and by oil tax policy.
The Oooguruk unit is developed from three pools: Nuiqsut, Kuparuk and Torok.
To date, Caelus and its predecessor Pioneer Natural Resources Alaska Inc. have drilled 43 wells at the unit - 28 at the Oooguruk Nuiqsut participating area, five at the Oooguruk Kuparuk participating area and four at the Oooguruk Torok participating area, plus one disposal well, and five appraisal and exploration wells outside of the participating areas.
The Oooguruk unit produced 4.1 million barrels in 2014, 4.2 million barrels in 2015, 5.2 million barrels in 2016 and 2.4 million barrels through the first half of this year, according to the Alaska Oil and Gas Conservation Commission. Cumulative oil production from the Oooguruk unit was 30.78 million barrels by the end of June 2017.
Recent activitiesWithout drilling activities, development work in the year ending in August 2017 focused on maintaining and upgrading facilities and on addressing development in other ways.
At the Oooguruk Nuiqsut participating area, Caelus evaluated three existing injection wells in a proposed expansion area at the unit - the ODSN-06i well in the northeast corner of the participating area near the Ivik exploration well; the ODSN-07i well in the northern end of the participating area drilled to support the ODSN-02 and ODSN-28 production wells; and the ODSN-10i well in the southwest corner of the expansion area.
The company briefly used ODSN-07i as a production well before converting it to an injection well in January. The company is also running extended pre-production tests from the ODSN-06i and ODSN-10i wells “to assess long term reservoir performance in these new development areas” before eventually converting the wells to injection.
And the company is monitoring the ODSN-03i after discovering early water injection breakthrough in its offset producing wells, ODSN-02 and ODSN-04. The company plugged a lateral in the well in July 2016 to isolate the relevant zone and removed the plug in April to resume injections and monitoring. “The surveillance data from the program will be used to assess reservoir management and remediation alternatives.”
The injection rate of the ODSN-27i and ODSN-34i wells was “significantly lower” following the shutdown of seawater deliveries from the Kuparuk River unit in September 2016. “Attempts were made to clear any debris possibly plugging the lateral by back-flowing and surging the wells. Injection performance is under review,” Caelus wrote.
At the Oooguruk Kuparuk participating area, oil production continued from horizontal producers ODSK-14 and ODSK-41, with ODSK-38i as the primary injector. The company returned the ODSK-35Ai well to injection this year. The company shut-in the ODSK-33 well “due to very high water-cut and significant hydraulic backout effects.”
At the Oooguruk Torok participating area, production continued from the ODST-39 and ODST-45A wells. The company recompleted the ODST-45A well in April 2016 to remove scale build up. The effectiveness of an April 2017 workover to address the problem is still being evaluated. The company also restored injection at the ODST-46i well after repairing a tubing leak to the inner annulus caused by a leaking gas lift valve.
The ODST-47 well is non-productive “due to mechanical failures.” Caelus is planning to contract the participating area to remove acreage associated with the well and instead use the well slot for future development of the larger Oooguruk Nuiqsut participating area.
Upcoming workThe work Caelus has announced for the Oooguruk unit for the 2017-2018 development year is focused on the Oooguruk Nuiqsut participating area, the largest of the pools.
The company has finished planning activities for six of the remaining 13 well locations - eight new wells and five reclaimed wells - intended for the participating area. The new wells will be ODSN-05, ODSN-08, ODSN-09, ODSN-11, ODSN-12 and ODSN-20.
Caelus is also planning eight workover projects at the unit, scheduled to start in August 2017. The workovers include recompletions to improve flow efficiency at seven existing wells (ODSN-02, ODSN-04, ODSN-16, ODSN-17, ODSN-28, ODSN-31 and ODSN-39) and a test of the Kuparuk formation in the Ivik fault block using a dual Nuiqsut and Kuparuk completion in the existing ODSN-29 well. The company is also planning to perform integrity repairs on three existing wells, ODSN-02, ODSN-04 and ODSN-28.
Slowdown at NunaThe future of the Nuna development is less certain than existing Oooguruk developments.
Caelus fully sanctioned the Nuna development in early 2015 and subsequently completed some initial infrastructure projects, including the Nuna Drill Site 1 and access road. The company also began permitting a second pad, should it decide to expand the project.
With the suspension of drilling activities in early 2016, Caelus also postponed aspects of Nuna, moving the startup date to “2018 or later” from an earlier date of late 2017.
In the 2016-2017 year, Caelus performed non-drilling tasks at Nuna. The company continued refining its cost estimates and assessing the overall commercial viability of the project based on drilling and engineering results and on permitting requirements. Over the coming year, the company expects to continue design, engineering and procurement activities and continue ongoing geologic studies with the goal of a “2018 or later” startup. Those plans also include an ongoing evaluation of “facility construction schedule and cost in light of oil price and tax structure environment,” according to the company.
In early 2017, during testimony for the oil tax revisions in House Bill 111, Senior Vice President of Alaska Operations Pat Foley said that the bill would erode the value of the Nuna development and would require higher oil prices for the project to proceed.
Even under normal circumstances, Caelus was skeptical about the economics of the project and requested royalty relief from the state. The Alaska Department of Natural Resources approved the relief in January 2015, lowering the royalty rate on Torok oil production from five leases to 5 percent until the development earns $1.25 billion.
The royalty relief decision involved a series of work commitments, including one requiring Caelus to begin sustained oil production from the Torok by Sept. 30, 2017.
When it became clear that the deadline would be impossible to reach, Caelus requested a two-year extension of its final work commitments. The state rejected the request, saying it did not have the authority to grant an extension but would welcome a new application.
Caelus Energy Alaska spokesman Casey Sullivan told Petroleum News that the company would “most certainly” re-apply for royalty modification at some point in the future.