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Vol. 16, No. 16 Week of April 17, 2011
Providing coverage of Alaska and northern Canada's oil and gas industry

ASRC seeks unit approval

Placer unit west of Kuparuk would encompass four leases, two exploratory wells

Wesley Loy

For Petroleum News

Arctic Slope Regional Corp. is proposing a new oil and gas unit on Alaska’s North Slope, just west of the giant Kuparuk River unit.

ASRC subsidiary ASRC Exploration LLC on Jan. 8 applied to the Alaska Department of Natural Resources for approval of the Placer unit.

Since then, Kevin Banks, director of the DNR’s Division of Oil and Gas, has twice written ASRC to say the application was incomplete. In letters dated Jan. 31 and March 21, Banks asked for considerable additional information.

Banks also seemed to question the need to form a unit, noting in the Jan. 31 letter that ASRC is the sole working interest owner and “there is no imminent exploration or development scheduled.”

An aspiring producer

ASRC, based in Barrow, is one of the regional Native corporations formed under the Alaska Native Claims Settlement Act of 1971. The company has vast land holdings across the top of the state, and represents about 11,000 Inupiat shareholders.

Through its major subsidiary ASRC Energy Services, ASRC long has been heavily involved with Alaska’s oil and gas industry, providing construction, engineering and other oil field services. In recent years, the company has shown aspirations in the exploration and production sector.

Thus far, ASRC has not operated a producing property on the North Slope. But with the approval of the Placer unit, that could change.

In its January unit application, ASRC Exploration said its proposed Placer unit “encompasses all or part of certain oil-bearing Kuparuk reservoirs.”

The unit would take in four state leases totaling 8,769 acres. The lease numbers are ADL 391023, 391024, 391027 and 391028. The leases are on the western edge of the ConocoPhillips-operated Kuparuk River unit, southwest of the Palm development.

The leases are due to expire on Jan. 31, 2012, but rolling them into a unit would keep them alive.

ASRC requested an effective date for the unit of March 1, with a term of five years. But that date passed as the company worked to meet the state’s requests for additional information.

Pair of wells drilled

The Placer unit also would take in two exploratory wells ConocoPhillips drilled in early 2004, the Placer No. 1 and the Placer No. 2.

The Placer No. 1 well was completed to a measured depth of 7,761 feet and its current status is listed as suspended, Alaska Oil and Gas Conservation Commission records show.

The Placer No. 2 well was completed to a measured depth of 9,118 feet and is listed as plugged and abandoned.

A document in the AOGCC file for Placer No. 1 said “sampling in the well recovered 26 API crude,” with indications of “high formation permeabilities and deliverabilities. Thus, the well appears fully capable of producing in paying quantities.”

At the time the Placer wells were drilled, ASRC was among a handful of companies with working interests in the effort as ConocoPhillips took the lead as operator.

Whatever the drilling showed evidently was not enticing enough for ConocoPhillips to stay and pursue a development.

In a March 2006 state lease sale, ASRC bid almost $131,000 for the land around the Placer wells, and now is the 100 percent working interest owner in the four leases proposed for inclusion in the Placer unit.

Plan of exploration

ASRC in January also submitted an initial plan of exploration for the Placer unit.

Under the four-year plan, it pledged to license an existing seismic data set, reprocess and reinterpret the seismic data, evaluate the “oil and gas potential and commerciality of the Kuparuk River formation and any other newly identified prospects,” and decide whether to re-enter and test the Placer No. 1 well or drill another exploration well.

ASRC said it would rework the licensed seismic data by Dec. 31, 2012. And it would either drill and log an exploratory well or re-enter and test the Placer No. 1 well by June 30, 2014.

In its March 21 letter to ASRC, the state Division of Oil and Gas requested a greater understanding of “the scope and timeline of the proposed seismic reprocessing and modeling once the license to the data is acquired,” as well as “the relationship between the proposed work commitments and the need” for unit formation.

Grouping leases together as a unit is meant to promote efficient exploration and production, minimizing facilities and protecting the rights of all parties of interest including the state.

Banks, the state oil and gas director, told Petroleum News the approval of a new unit is something the state is doing with greater deliberation.

Unitizing state land can, and has, made it tougher for the state to reclaim leased acreage if work commitments aren’t met, he said.

“The rule of thumb these days is you better have something there, in terms of resources, and show us what you’re going to do to develop them,” Banks said.

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