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Vol. 20, No. 11 Week of March 15, 2015
Providing coverage of Alaska and northern Canada's oil and gas industry

Royale postpones

Independent cancelled rig contract last summer; to begin drilling in 2016

Eric Lidji

For Petroleum News

Royale Energy Inc. has postponed its exploration plans for this winter.

The San Diego-based company cancelled a contract with Kuukpik Drilling in late July 2014 after its partner, Rampart Energy Inc., declined to fund a cash advance on the rig, according to the companies. The partners are now involved in legal proceedings, which has delayed the proposed two-well exploration program until next winter, at the earliest.

The partners had begun permitting a two-well exploration program on their “Western Block,” a collection of leases along the Colville River, in the area south of Nuiqsut.

A May 2013 deal between the companies gave Rampart the ability to earn increasing working interest in those and other leases by funding aspects of an exploration program.

Worried about being unable to fund the drilling program planned for this winter, the partners decided to end the Kuukpik contract to avoid losing “a substantial deposit.”

Search for more partners

After Royale cancelled the contract, Rampart launched a “Strategic Partnering Process” to “identify funding partners” for the exploration program. The company wanted to perform additional technical work “to present the true potential of the opportunity to prospective industry and financial partners, and secure favorable commercial terms.”

By late October, discussions on how best to advance the exploration program were still “continuing,” according to Rampart. In a statement at the time, the company said, “The parties have differing views on a number of key issues regarding the joint venture and there is no guarantee that a mutually acceptable resolution will be reached. As a result, the board is considering all options regarding its future involvement in the project.”

According to Rampart, Royale filed a complaint against Rampart in November 2014 and Rampart filed a counterclaim against Royale in December. “The parties are currently in early stages of litigation, however commercial discussions continue in parallel,” Rampart reported in a February 2015 presentation. The company also said it wanted an agreement that would “enable Rampart to focus on growth opportunities outside of the U.S.”

Aki and Central

In an oil discharge prevention and contingency plan released for public comment in August 2014, Royale described “plans to conduct a regional, multi-year onshore oil and gas exploration drilling program during the winter months on the North Slope.”

The Aki and Central Exploration Drilling Program included plans for two areas.

The company said it had identified locations for eight potential wells at its Aki prospect along the Colville River south of the village of Nuiqsut and for six potential wells on its Central prospect south of the Kuparuk River unit. The company said it intended to “drill up to four exploratory well locations during the two winter seasons between 2014-2015; with potential additional locations drilled within the lease blocks in future years.”

The Aki wells would have been drilled from a temporary ice pad accessed by a snow/ice road from Kuparuk River unit Drill Site 2P. A separate snow-ice road from the Franklin Bluffs staging area along the Dalton Highway would have accessed the Central wells.

The Aki and Central prospects have “both conventional and unconventional formations,” according to Royale, which listed the conventional formations as Upper Jurassic, Kuparuk and Brookian and the unconventional as Shublik, Lower Kingak and shale.

After completing a seismic survey over the Royale acreage in early 2014, Rampart committed some $50 million to upcoming exploration work. “The preliminary results available to date are showing excellent data quality and clearly highlight the key interpretable intervals such as the Brookian and HRZ packages, and near top Kingak Formation. We look forward to reporting on interim processing deliverables, and our early interpretation, in due course,” Rampart CEO Torey Marshall said in April 2014.

In early June, Royale said that preliminary interpretation of the seismic information had “identified a large conventional target, covering an area of up to 20,000 acres.”



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