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Vol. 17, No. 36 Week of September 02, 2012
Providing coverage of Alaska and northern Canada's oil and gas industry

Going for more

Doyon announces exploration initiatives for Nenana and Yukon Flats basins

By Alan Bailey

Petroleum News

Doyon Ltd. is continuing to move forward with exploration for oil and gas in the Nenana and Yukon Flats basins in the Alaska Interior, the Alaska Native regional corporation announced Aug. 27. For several years the corporation has been investigating the oil and gas potential of the two basins, in hopes of generating profits for the corporation’s shareholders, creating employment opportunities and boosting Alaska oil and gas production.

Three initiatives

It its latest exploration drive the corporation plans to spend more than $37 million on three initiatives:

• Converting 400,000 acres of a 485,000-acre state oil and gas exploration license in the Nenana basin into state oil and gas leases.

• Drilling a new exploration well in the Nenana basin, as early as this winter.

• Conducting a new seismic survey in the Yukon Flats basin during the coming winter.

“These projects show a lot of promise,” said Doyon CEO Aaron Schutt in an Aug. 27 press release. “If successful, they could provide substantial benefits not just to our shareholders, but also to all Alaskans in terms of jobs and helping alleviate the energy crisis in interior Alaska.”

Recent state legislation introducing new exploration tax credits and reducing the oil and gas production taxes for “frontier basins” in Alaska “were essential to us to move forward with these substantial projects,” Schutt said.

Both the Yukon Flats and the Nenana basins consist of huge depressions in the Earth’s crust that have resulted from movements along major geologic faults and that have become filled with river- and lake-borne sediments, primarily of Tertiary age.

The presence of coal seams, formed from decomposed vegetation in the basins, indicates the potential for the formation of natural gas, and Doyon has also found evidence that the corporation thinks indicates a potential for oil formation.

Nenana basin

Doyon’s primary interest in the Nenana basin has been the possibility of finding natural gas at a location close to the road, railroad and electricity transmission corridors between Anchorage and Fairbanks — the basin lies about 50 miles southwest of Fairbanks. The corporation has been exploring the basin in partnership with Rampart Energy Co., Arctic Slope Regional Corp., Usibelli Energy LLC and Cedar Creek Oil & Gas Co. Much of the exploration has been taking place in state land in the basin, under the terms of the state exploration license. Doyon is the current operator of the license.

Doyon licensed some seismic data acquired by Shell in the 1980s, reprocessing Shell’s field recordings using up-to-date technology. The Nenana partnership conducted its own seismic surveys in the more southerly part of the basin in 2004 and 2005. And in 2009 the partnership drilled an exploration well, the Nunivak No. 1 well, about three miles west of the town of Nenana.

The well did not encounter an economic gas accumulation but provided intriguing evidence for the hydrocarbon potential of the basin. In particular, coal samples contained hydrocarbons that appeared to have formed from the heating of the coal, rather than from the bacterial decomposition of organic debris. And the geochemical analysis of soil samples from land over the basin found trace quantities of a similar hydrocarbon mix. That all implies the possibility of oil forming in the basin, if temperatures at depth have reached appropriate levels.

Re-assessment

The merging of seismic data with proprietary gravity and magnetic data, and with data from the Nunivak well, have enabled a complete re-assessment of the basin, with that re-assessment pointing to much greater maximum basin depths than previously thought, as well as uncovering some hitherto unseen geologic structures.

And with some parts of the basin perhaps as deep as 25,000 feet, the possibility exists that oil could have formed in some places, Doyon says.

In the winter of 2011-12 Doyon conducted its own seismic survey in the more northerly part of the basin.

The state exploration license for the Nenana basin expires in September and, given the promising results of the work done so far, Doyon decided to convert the bulk of the license area to oil and gas leases, Jim Mery, Doyon Ltd. senior vice president, land and natural resources, told Petroleum News.

“We’re going to take leases to everything that we still believe currently has connection to source rock,” Mery said.

West of first well

Doyon’s new exploration well will be located about seven miles west of the Nunivak No. 1 well, at a location with a large structural closure in direct contact with the deeper part of the basin, Mery said. The corporation is still seeking a drilling rig that it can contract for the drilling, he said.

“We’re working on that,” Mery said.

And at this point Doyon does not know whether its partners in Nenana basin exploration will buy into Doyon’s new initiatives. The partners, if they wish to participate, would need to first agree to a share of the expense of the lease conversion before agreeing to share in the cost of drilling the well.

“Those are unknowns just now,” Mery said.

Doyon also sees some exciting possibilities in the northern part of the basin, having completed its new seismic survey in that area and re-assessed the basin using information already available. But, although there appear to be some very large geologic structures in that northern area, Doyon’s analysis of the area has not yet developed any exploration concepts to the level of maturity of the evaluation done to the south, Mery said.

However, having made all of the exploration investment in the northern part of the basin, Doyon has, subject to some necessary paperwork, in effect acquired a 100 percent working interest in that part of the basin, Mery said.

Yukon Flats

The Yukon Flats basin underlies a 15,000-square-mile lowland area around the Yukon River, between the trans-Alaska oil pipeline and the Canadian border. The main basin consists of several sub-basins. An assessment of the basin, done a few years ago by Petrotechnical Resources of Alaska, suggested significant oil potential, in addition to natural gas potential, with the possibility of an oil field the size of the Alpine field on the North Slope.

Doyon has been investigating the resource potential in Native lands within the basin, seeing the prospect of oil and gas royalties for the corporation and its shareholders, as well as other economic benefits.

Survey decision

Doyon is still determining which of two possible seismic surveys to conduct in the Yukon Flats during the coming winter, Mery said.

“We’re assessing both right now,” he said.

One possibility is a reconnaissance 2-D survey over a sub-basin near the village of Birch Creek. Data from seismic gathered from this sub-basin many years ago by Exxon display some intriguing features, Mery said. The other possibility is a more focused 3-D survey on another sub-basin at Stevens Village, where Doyon shot a 2-D reconnaissance survey about three winters ago. The 3-D seismic would be used to identify specific drilling targets.

Surface sampling and geochemical analysis of material on the ground above the Stevens Creek sub-basin has detected traces of oil and natural gas liquids that would have formed through a thermal process in the sub-surface. Doyon has said that traces of surface hydrocarbons are also prevalent over the Birch Creek sub-basin.

Investors

The Yukon Flats basin is particularly large and Doyon wants to attract investors, to share the exploration risk.

“Our ultimate objective, obviously, is to add enough value and prominence to make these areas attractive to other people, especially the Yukon Flats,” Mery said. “You’re basically really talking about three Nenana basins in the Yukon Flats.”



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