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Vol. 18, No. 46 Week of November 17, 2013
Providing coverage of Alaska and northern Canada's oil and gas industry

Producers 2013: Eni looking to expand Nikaitchuq

With its initial development of the OA sands wrapping up, the Italian major is now evaluating development of the N sands

Eric Lidji

For Petroleum News

Eni Petroleum is expanding its operations at its Nikaitchuq unit.

After more than three years of sustained production, the Italian major is evaluating a previously undeveloped oil-bearing interval at the North Slope field in the state waters of Harrison Bay, and also looking at using multilateral completion techniques for its wells.

When Eni sanctioned Nikaitchuq in early 2008, it made the case for development based on the oil contained in the OA sands of the Schrader Bluff formation. But the company always suggested it might someday pursue the shallower N sands of the same formation, as well as a minor oil accumulation encountered in the deeper Sag River formation. Now, as Eni nears the end of its initial slate of OA development wells, it is testing the N sands.

Eni said it intends to drill three development wells at Nikaitchuq in the latter half of 2013, one of which will primarily test oil production from the N sands reservoir.

It would be the first well Eni has drilled exclusively to evaluate the N sands.

Pilot well in 2015

The goal is to use the results of the test well and an ongoing reservoir modeling study “to plan a pilot well of this reservoir” in 2015. If the pilot proves the N sands to be economic, Eni envisions an “initial development phase” with four to nine “pre-development” wells.

Because the N sands are shallower than the OA sands, all previous drilling at Nikaitchuq has penetrated the interval, but Eni has also been testing the extent of the N sands by extending four existing horizontal OA sands wells into the northwest corner of the unit.

Additionally, Eni said it is considering a second offshore drilling island at the unit, which would allow it to better target potential resources in the farther northwestern reaches.

Cumulatively, Eni produced more than 7.4 million barrels of oil at Nikaitchuq through July 2013. The field produced 12,062 bpd in July, down from 12,117 bpd in June.

An eight-year cycle

Eni first arrived in Alaska in the late 1960s through its affiliate company Agip Petroleum, but the company traces its most recent push in the state to the mid-2000s. In 2005, Eni bought a minority interest in several North Slope prospects from Armstrong Alaska and in 2007 it bought the outstanding interest in those prospects from Kerr-McGee Corp.

Those assets included Nikaitchuq, Tuvaaq and a stake in Oooguruk, three offshore prospects in the state waters of the Beaufort Sea, north and northwest of the Kuparuk River unit. It also included several onshore prospects, including the Maggiore and Rock Flour prospects in the central North Slope south of Prudhoe Bay and Kuparuk River.

Working with Armstrong Alaska Inc., Kerr-McGee Corp. drilled the Nikaitchuq No. 1 discovery well in 2004, and delineated the field in 2004 and 2005 with the Nikaitchuq No. 2, No. 3 and No. 4, Kigun No. 1 and Tuvaaq No. 1 exploration wells. Eni Petroleum gradually acquired 100 percent working interest in the field between 2005 and 2007, and drilled the Oliktok Point No. I-1 and No. I-2 delineation wells in 2006 and 2007.

Developing Nikaitchuq

Eni quickly worked to make its offshore prospects viable.

In 2007 and 2008, the Alaska Department of Natural Resources agreed to expand Nikaitchuq to include Tuvaaq, and granted royalty modification for much of the unit.

The modification allows Eni to pay the state a 5 percent royalty rate when the delivered price of Alaska North Slope crude oil drops below $42.64 per barrel, a threshold adjusted annually for inflation. The modification is available to Eni for the first 25 years of sustained production at Nikaitchuq, which would be early 2036, barring any shutdowns.

In February 2008, less than a month after getting the royalty relief, Eni sanctioned a $1.45 billion development program at Nikaitchuq. The plan envisioned 73 production and injection wells split between an onshore pad at Oliktok Point and an offshore artificial island in the shallow waters near Spy Island. The plan also included a 3.8-mile subsea pipeline and a 40,000-barrel-per-day production facility at Oliktok Point — the first such facility in northern Alaska to be operated by a company other than BP or ConocoPhillips.

Production in 2011

At the time, Eni expected to bring Nikaitchuq online by late 2009, but weather delays and the short Arctic sealift season delayed the program. Production began from Oliktok Point on Jan. 31, 2011, just four days shy of three years after Eni sanctioned development.

After the summer construction season, Eni completed the Spy Island drill site in August 2011, spud its first well from the island in October and began production in November.

The Nikaitchuq field produces from the same oil-bearing sands of the Late Cretaceous-aged Schrader Bluff formation found at Prudhoe Bay, Kuparuk River and Milne Point.

The Nikaitchuq Schrader Bluff Oil Pool contains two sands: the OA and the N. Testing has also encountered minor oil accumulations in the Triassic-era Sag River sandstones.

Eni believes the OA sands hold between 800 million and 930 million barrels of oil in place and expects to produce as much as 220 million using primary recovery and waterflood injection — a 30-year field life peaking at some 28,000 barrels of oil per day.

Testing multilaterals

Those figures could rise, though, if Eni finds success with multilaterals.

In February 2013, Eni tested an “alternative completion methodology” at Nikaitchuq by drilling a multilateral well from its offshore island, its first such well in Alaska.

Eni drilled the SP22-FN1 directional well to 22,923 feet measured depth and 3,408 feet vertical depth with four laterals ranging from 1,600 to 2,000 feet each. The results of the first well prompted the company to later drill OP08-OL41, a second multilateral well from its onshore pad. Unlike the first multilateral, Eni drilled the laterals of this second well after casing and cementing the main wellbore to improve the integrity of the well.

Should Eni ultimately sanction an N sand development, these multilaterals could allow it to develop both intervals simultaneously, or at least reduce its overall drilling footprint.

For now, though, Eni clearly sees multilaterals as an important next step for the field.

Eni plans to cold stack Nabors Rig 245 until March 2014, when it would launch a workover campaign to convert eight existing Oliktok Point wells to multilaterals by drilling sidetracks between 6,000 and 10,000 feet in length. Eni is also considering a plan to drill all future Spy Island drill site wells as multilaterals starting in January 2014.

For its 2015 program, Eni is considering a workover campaign to convert eight existing Spy Island drill site wells to multilaterals with specifications similar to those planned for the Oliktok Point pad. This would be in addition to the proposed N sands development.

Both campaigns are contingent on corporate approval, the company said.

Spy Island drilling

Eni released one rig from its program in October 2012 after completing its initial slate of OA sands wells planned for the Oliktok Point pad, but with the three-well program planned for summer 2013 — which includes the N sands test well — the company now plans to conduct “intermittent” drilling from the onshore pad using Nabors Rig 245.

Since November 2012, Eni has been conducting “continuous” drilling from the Spy Island drill site using Doyon Rig 15. The program includes four production and five injection wells, which include the N sands extensions, and is scheduled to run through November. Eni expects to complete its initial slate of offshore wells in November 2014.

In addition to its development drilling, Eni has also been conducting or plans to soon conduct workovers from both drilling pads this year — three rigless and four rigged.

While Eni expects this activity to increase production this year to as much as 14,000 barrels per day up from 10,000 bpd, the company expressed “significant uncertainty concerning the production potential from the wells to be drilled in the coming year.”

Is Sag River next?

In addition to its N sands appraisals planned for the coming year, Eni is also in the early stages of evaluating a potential development of the Sag River formation at Nikaitchuq.

The program would require Eni to build a second artificial island to better reach prospects in the northwest corner of the unit. Eni said it intends to submit a proposal for such a development to its “upper management” within the next 12 to 18 months. The proposal or something similar could be necessary for Eni to keep all its acreage at the Nikaitchuq.



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