Brooks Range Petroleum Corp. wants to expand the Southern Miluveach unit.
The state is considering a request from the operating arm of the multi-party joint venture to add approximately 19,552 acres from 11 leases to the north, west and northeast of the onshore North Slope unit. The expansion would more than double the size of the unit.
The state will be accepting comments on the request through Aug. 4.
Any development in the expansion acreage would be “only marginally economic at today’s cost and price structure on the North,” Brooks Range Petroleum CEO Bart Armfield wrote in a June 21 letter to Department of Natural Resources Commissioner Andrew Mack, requesting the expansion. Treating the acreage as a satellite of the in-development Mustang project at the Southern Miluveach unit “is both the fastest route to production and results in the greatest ultimate recovery of resource,” Armfield added.
To date, the working interest owners of Southern Miluveach have spent more than $250 million on the unit and the expansion acreage, according to Brooks Range Petroleum.
First oil by 2022
In a supplemental plan of development included in the application, Brooks Range Petroleum said it would develop the expansion acreage as a satellite of the Mustang development. The company would construct a 15-acre gravel Pinto pad on ADL 391549 to support a 40-well program divided evenly between producers and injectors. Any production from the expansion acreage would be processed at the Mustang facilities.
According to a timeline included in the plan, Brooks Range Petroleum would spend the next year evaluating the Torok and the Kuparuk formations in the expansion acreage by interpreting seismic data and monitoring nearby wells. The yearlong evaluation period is needed, according to the company, because the analog wells only recently came online.
An exploration program to test the Torok formation in the expansion acreage would begin as early as the 2018-19 winter drilling season. The program would either test an existing well or would drill and test a new well in the area. If warranted, Brooks Range Petroleum would also conduct a test of the Kuparuk formation in the expansion acreage.
If the company sanctioned a development, road and pad construction would likely begin in early 2020 with development drilling in early 2022 and first oil by the end of that year.
As part of its expansion request, Brooks Range Petroleum asked that the automatic contraction date for the new acreage be set no sooner than July 1, 2022. The contraction date sets a deadline for development activities before acreage is stripped from a unit.
Reviving old request
In late 2010 and early 2011, Brooks Range Petroleum asked the state to form the Southern Miluveach unit over 40 leases covering approximately 60,864 acres.
In an exploration plan at the time, the company divided the unit into six exploration blocks. It proposed a five-year development plan for the Southeast block (also known as the Mustang prospect) and a three-well exploration program - one in the Northeast block in 2014, one in the Northwest block in 2015 and one the Southwest block in 2016.
The state felt that the plan did not justify holding such a large parcel of acreage and instead formed two smaller units. The new Southern Miluveach unit covered the former Southeast block - some 8,960 acres over five leases. The Kachemach unit covered portions of the former Northwest and West blocks - some 16,487 acres over 18 leases.
The remaining 37 leases, covering some 35,417 acres located between the two new units, remained un-unitized, allowing each lease to expire at the end of its primary term.
Some of the leases expired at the end of May 2014. The joint venture later re-acquired all the expired acreage at a subsequent lease sale. Other leases expired at the end of June 2017, after Brooks Range Petroleum filed its application for unit expansion on June 21.
The proposed expansion includes all of the leases set to expire this year and about half of the acreage that Brooks Range Petroleum reacquired after the May 2014 expirations.
The Kachemach unit was eventually terminated after Brooks Range Petroleum failed to meet work commitments. Armstrong Energy Inc. and Caelus Energy Alaska Inc. separately acquired portions of the former Kachemach unit at a subsequent lease sale.
The original decision to split the Southern Miluveach application into two units came at a time when the Division of Oil and Gas was taking a stricter approach to unitization.
Around the same time, the division approved the Placer unit, immediately to the north of Southern Miluveach. The approved unit boundaries were considerable smaller than those requested by operator Arctic Slope Regional Corp. Over the following years, though, the company managed to convince the division that it needed the larger area, both to distinguish new exploration activities from previous work and to make the unit economic, arguments similar to those Brooks Range Petroleum is now making in its application.
Mustang deadline
The expansion request comes as Brooks Range Petroleum is working to bring the Mustang development into production before a year-end deadline imposed by the state.
The company initially expected to bring the unit into production several years ago. But technical complications encountered during the initial drilling program forced the company to halt activities while it upgraded its drilling rig to handle higher pressures.
In late June 2017, the Alaska Industrial Development and Export Authority provided an additional $2.5 million investment into the Mustang projection as bridge financing.
