The Alaska Venture Capital Group is leaving the Kachemach unit.
Earlier in October the Kansas-based AVCG LLC terminated the onshore North Slope unit, which allowed 18 leases there to expire, effective Sept. 5. The unit was located in the “billion-dollar fairway” between the Kuparuk River and Colville River units.
In December 2010, the AVCG operating arm Brooks Range Petroleum Corp. asked the state to form the Southern Miluveach unit over 40 leases covering some 60,864 acres.
The state ultimately approved two smaller units. The Southern Miluveach unit included five state leases covering some 8,960 acres and the Kachemach unit included 11 joint state of Alaska and Arctic Slope Regional Corp. leases covering some 16,487 acres.
The remaining leases stayed un-unitized.
The Kachemach unit agreement split the area into two exploration blocks. The agreement required Brooks Range Petroleum to complete a well in Block A targeting the Caribou trend and another well in Block A targeting the Moonlight trend by May 31, 2013.
The wells would have been the first exploration at the leases. Nearby, Union Oil Company of California had drilled the Kookpuk No. 1 in 1966 and 1967, ARCO had drilled Colville River No. 1 in 1993 and ConocoPhillips had drilled the Oberon No. 1 well in 2003. Based on those wells and seismic information acquired in 2011, Brooks Range Petroleum identified targets in the Nanushuk and the deeper Kuparuk formations.
Priority to Mustang
But Brooks Range Petroleum prioritized exploration at Southern Miluveach, specifically the Mustang development. Those activities proved up an oil discovery. Earlier this year, AVCG and its partner Ramshorn Investments Inc. sold much of their Alaska holdings, as well as Brooks Range Petroleum, to a three-party joint venture for $450 million.
The joint venture is working with the Alaska Industrial Development and Export Authority to finance independent processing facilities at the unit. A development program scheduled to begin later this year could bring the field online by next year.
During the Mustang program, Brooks Range Petroleum officials kept deferring a decision about whether to explore at the nearby Kachemach unit. “Decisions on proceeding - or not proceeding - with some or all of these wells will be made in the next few months and will be based on working interest owners’ technical and capital budgeting priorities,” AVCG lead member Ken Thompson told Petroleum News in August 2012.
The following month, the company dropped all 21,947 acres of the nearby Putu unit and 42,119 acres on the western side of the Beechey Point unit north of the Prudhoe Bay unit.
Brooks Range Petroleum seemed optimistic about Kachemach in early October. But in December 2012 the company told Petroleum News that the program “remains under consideration within the (Department of Natural Resources), and we are not at liberty to speculate as to the response that may come from the decision issued by the DNR.”
In March 2013, as the Kachemach unit deadline approached, Brooks Range Petroleum Chief Operating Officer Bart Armfield told Petroleum News that the company “continues to re-process and merge acquired seismic data to identify optimal drilling location and target” and planed to drill an exploration well in early 2014, pending partner approval.
The company did not drill those wells earlier this year.
Anadarko leases expire
In a continued sign of the company “rightsizing” its portfolio, four Anadarko Petroleum Corp. leases in the foothills of the Brooks Range Mountains expired in September.
The four leases - ADL 391165, ADL 391166, ADL 391167 and ADL 391168 - are small irregular tracts located atop the actual waterway of the Colville River near Umiat. The leases were immediately north and west of a swath of Arctic Slope Regional Corp. leases where Anadarko conducted a pioneering natural gas exploration campaign several years ago. The ASRC leases are known as the Gubik Complex.
Anadarko once held some 3.3 million acres of state, federal and Native leases across the foothills of the Brooks Range. The current leasehold is much smaller, the result of relinquishments and expirations. Anadarko still holds the core of its exploration area.
The Gubik program was the first on the North Slope to specifically target gas, which remains stranded until a pipeline connects the region to market. When Anadarko began the program in 2008, many saw it as an expression of faith in then-Gov. Sarah Palin’s efforts to jumpstart stalled pipeline efforts with the Alaska Gasline Inducement Act.
That program has since shifted to the Alaska LNG Project.
The Gubik No. 3 exploration well tested at 15 million cubic feet per day. Anadarko drilled three more exploration wells in the region by the end of 2009. Since then, the only work on the ground has been a rigless test in early 2012. Those results are unknown.
Anadarko held the four expired leases in partnership with Petro-Canada and BG E&P.
Other expirations
Other September expirations included:
•Two ConocoPhillips leases. The first - ADL 391179 - was several miles south of the Meltwater satellite of the Kuparuk River unit. The lease had been among a block of four; the other three expired in January 2014 and included the BP Ekvik No. 1 well. The second - ADL 391401 - was nestled between the Kuparuk River and Qugruk units.
•Nine Repsol E&P USA Inc. leases in several blocks. The first block - containing ADL 391382, ADL 391383, ADL 391384, ADL 391385 and ADL 391386 - were offshore leases north of the Caelus Natural Resources Alaska-operated Oooguruk unit. Two more leases - ADL 391389 and ADL 391390 - are due west. The remaining two leases - ADL 391399 and ADL 391400 - are farther west, beyond Repsol’s Qugruk unit. The expirations do not include any leases where Repsol has drilled in recent winters. Earlier this year, the state extended the terms on 22 other Repsol leases across the region.
Also in September, Auxillium Alaska Inc. surrendered two leases in the foothills of the Brooks Range. The New York based independent acquired the leases - ADL 391326 and ADL 391327 - in a May 2012 lease sale, but never performed any exploration activities. Auxillium also picked up a lease in the Alaska Peninsula earlier this year.
Two contractions
The September lease report finalizes a mandatory contract of the Colville River unit.
The Division of Oil and Gas removed 18 leases from the North Slope unit, which is operated by ConocoPhillips. The contraction was built into the original unit agreement.
The state also contracted three leases from the Nikaitchuq unit.
The contract was established in the seventh plan of development for the unit, which operator Eni US Operating Co., Inc. proposed earlier this year. The three leases - ADL 390433, ADL 388573 and ADL 388580 - are at the outer reaches of the offshore unit and would require either extended-reach drilling or a new offshore island to develop.
Cook Inlet activity
In Cook Inlet, the Division of Oil and Gas is considering a request from the Estate of Finlay MacLennan to transfer small royalty interests in various segments of two North Fork unit leases - ADL 2095 and ADL 390514 - to a variety of individuals.
At the Kitchen Lights unit, the state is considering a request from David J. and Catherine T. Doherty to transfer 0.5 percent royalty interest in six leases and a request from Cornucopia Oil & Gas Co. LLC to transfer a small working and royalty interest - all 0.001 percent or smaller - in 29 leases to its subsidiary Corsair Oil & Gas LLC.
The state is considering a request from the Estate of George Kasper to transfer a small royalty interest in one lease at the Redoubt unit - ADL 378114 - to Arlene Kasper.
Also in September, one Apache Alaska Corp. lease expired. The offshore lease - ADL 391109 - was located near the Middle Ground Shoal field and the Kitchen Lights unit.
And in September, four Buccaneer Alaska LLC leases expired. One lease - ADL 392387 - was in a block associated with the onshore West Eagle unit in the southern Kenai Peninsula. The other three - ADL 391107, ADL 391108 and ADL 391788 - had been associated with the offshore Southern Cross unit, which has since been terminated.
Buccaneer is currently involved in bankruptcy proceedings.
Finally, Nicholas Van Wyck recently surrendered one lease at Mount Augustine Island.
