The Italian major Eni Petroleum first invested in Alaska through its subsidiary Agip Petroleum, which acquired leases in the 1960s and operated on the Kenai Peninsula through “outsourcing agreements” signed with American operators in the late 1970s.
In 2005, Eni acquired a minority interest in several North Slope prospects from Armstrong Alaska, and in 2007 the company acquired the outstanding interest in those prospects from Kerr-McGee Corp. The assets included three offshore prospects in the state waters of the Beaufort Sea, north and northwest of the Kuparuk River unit: Nikaitchuq, Tuvaaq and a stake in Oooguruk. It also included the onshore Maggiore and Rock Flour prospects in the central North Slope south of Prudhoe Bay and Kuparuk.
Eni relinquished the Rock Flour and Maggiore prospects in 2010, after drilling wells at both prospects in early 2007. In 2011, the company farmed out six leases in the North Tarn prospect, southwest of the Kuparuk River unit, to a joint venture operated by Brooks Range Petroleum Corp. A new joint venture is currently developing that prospect.
The start up of the Oooguruk unit in mid-2008 made Eni a producer, albeit in a non-operating capacity. The experience gave the company insight into the Alaska Arctic.
Over the course of 2007, Eni more than doubled the size of the Nikaitchuq unit by incorporating leases from the neighboring Tuvaaq unit to the west as well as a bundle of un-unitized leases to the south. The company also secured royalty modification on 12 of the 18 leases at the expanded unit, creating a structure where it would pay lower royalties to the state if the price of oil dropped below an inflation-adjusted threshold.
In January 2008, Eni sanctioned a $1.45 billion program to bring Nikaitchuq into production by late 2009. Weather delays, combined with the short Arctic sealift season, ultimately pushed the program back one year. The unit came online in February 2011.
The development program called for an onshore pad at Oliktok Point and an offshore pad at Spy Island. The initial drilling program from the Oliktok Point pad finished in August 2012 and continuous drilling from the Spy Island drill site began in November 2012.
The Nikaitchuq unit
Eni US Operating Co. Inc. might complete its initial development program at the Nikaitchuq unit by the end of next year, according to its current plan of development.
The American subsidiary of the Italian major had previously projected that the work would be completed by the end of this year, but a program of lateral sidetracks to increase oil production is expected to continue well into 2016, the company said.
This year, Eni intends to drill five wells - three producers (SP31-W7, SP04-SE5 and SP01-SE7) and two injectors (SI34-W6 and SI107-SE4) - and seven dual lateral producers (SP31-W7 L1, SP04-SE5 L1, SP33-W3 L1, SP30-W1 L1, SP01-SE7 L1, SP16-FN3 L1 and SP23-N3 L1) into the OA reservoir from the Spy Island drill site. The wells include penetrations associated with an expansion into the northwest of the unit.
The dual laterals are part of a strategy for optimizing oil production by designing wells that undulate through a target formation counter to the undulation of existing laterals.
The company currently plans to drill five dual lateral producers from its Spy Island drill site in 2016: SP23-N3 L1 (which is also listed as one of the proposed well locations intended for this year), SP10-FN5 L1, SP27-N1 L1, SP18-N5 L1 and SP05-FN7 L1.
Eni initially planned a two-phased program for Nikaitchuq, starting with drilling from the onshore Oliktok Point Pad and continuing from the offshore Spy Island drill site.
The company completed its initial Oliktok Point Pad program in August 2012 and began continuous drilling from the Spy Island drill site in November 2012 with Doyon Rig 15.
In 2013 and 2014, the company conducted a sidetrack program to add second laterals to certain producers drilled from the Oliktok Point Pad. The program included workovers to replace electric submersible pumps as well as an N sands pilot well. The program finished in May 2014. The company also worked over two wells at Spy Island in 2014.
Through the end of this year, Eni expects it will have drilled 55 wells at the unit - 28 producers, 22 injectors, three water source wells and two disposal wells. Of the 55 wells, 23 will have been drilled from the Oliktok Point Pad and 32 from the Spy Island drill site.
The unit was producing 25,393 barrels per day at the end of 2014. Through July 2015, the unit had produced 23.2 million barrels of oil from the Schrader Bluff formation.
Expansions
The future of the unit depends on various expansions - some which have been under evaluation for years and one that was recently proposed publicly for the first time.
The newest proposal is being called the “East Extension Project” and could add three or four wells to the development program in 2016, according to the company. The company provided no further details about the proposed project in its plan of development.
Last year, Eni listed three proposed expansion opportunities for the unit: extending the current development of the Schrader Bluff OA sands into the “western area” of the unit, developing the Schrader Bluff N sands and developing a Sag River oil reservoir.
Those three proposals are developing at different rates.
Eni recently sanctioned its “western area development,” which will extend drilling into the northwest corner of the unit. The area was considered technically unfeasible until recent years, when it became merely “challenging,” according to the company.
The program includes two producers (SP21-NW1, SP31-W7), two injectors (SI34-W6, SI26) and two dual laterals (SP21-NW1 L1, SP31-W7 L1) drilled from the Spy Island drill site. Eni completed the producer SP21-NW1 and the lateral SP21-NW1 L1 in November 2014, the producer SP31-W7 and the lateral SP31-W7 L1 in February 2015, and the SI34-W6 injector in March 2015, according to the Alaska Oil and Gas Conservation Commission. The remaining injector, SI-26 has yet to be permitted.
The company said it will “continue evaluating opportunities” from Spy Island and plans to drill two producers (SP28-NW3 and SP03-FN9) and one injector (SI06-FN9) in 2015.
N sands, Sag River
Eni sanctioned Nikaitchuq based entirely on the potential of the Schrader Bluff OA sands but early on the company saw an opportunity to develop the shallower N sands.
In recent years, the company launched an appraisal program after preliminary studies suggested between 40 million and 100 million barrels of “contingent resources” in the N sands. Previous plans of development for the unit mentioned “sedimentological, petrophysical and reservoir studies,” the extension of the several OA sands development wells to test the N sands and a pilot well drilled in 2013 to test completion strategies.
Having completed reservoir modeling and original oil in place calculations for the N sands in 2014, the company is launching a “technical economic analysis” this year to craft a develop scenario. The process could produce a conceptual proposal by 2016.
The proposed Sag River development is missing from the current plan of development.
In its previous plan of development, submitted July 2014, the company said it intended to submit a proposal for a Sag River development to upper management within 18 months.
The oil in the Sag River formation is deeper and generally lighter than the oil in the Schrader Bluff formation, where development currently occurs. The Sag River is “plagued with poor quality reservoir rock” and development would be “marginal at best unless there are significant advances in stimulation or enhanced oil recovery technology,” state officials wrote in a previous decision to modify the royalty structure at Nikaitchuq.
In the current plan of development, Eni said it would “continue to review its geological, petrophysical, and drilling information to help improve our understanding of the Nikaitchuq unit reservoir(s)” and would “continue assessing exploitation opportunities when available in the acreage immediately outside current develop areas, outside the Unit and at various horizons,” which leaves room for a future Sag River development.
