Brooks Range Petroleum Corp. was created in 2004 as the operator arm of the Kansas-based Alaska Venture Capital Group LLC, which was created explicitly to target large or mid-sized oil fields passed over during the first decades of North Slope development.
Working on behalf of varying joint ventures, Brooks Range Petroleum pursued exploration opportunities across the North Slope, including the Beechey Point unit, Tofkat unit, Putu unit, Kachemach unit and a related cluster of prospects nestled between the Badami and Point Thomson units known under various names over the years.
Ultimately, Brooks Range Petroleum made a large discovery southwest of the Kuparuk River unit. The prospect was initially called North Tarn and later became known as Mustang. The discovery was eventually incorporated into the Southern Miluveach unit.
To help finance development, AVCG and its partner Ramshorn Investments Inc. sold a 90 percent stake in their Alaska holdings and 100 percent interest in Brooks Range Petroleum for $450 million to a three-company consortium in mid-2014. By using the Alaska Industrial Development and Export Authority as a financier for two major infrastructure projects, the consortium handed over some working interest in the unit to two public-private joint ventures. Today, Brooks Range Petroleum operates the Southern Miluveach unit on a behalf of seven working interest owners: Caracol Petroleum LLC (36.28 percent), TP North Slope Development LLC (22.46 percent), Mustang Operations Center 1 LLC (20 percent), MEP Alaska LLC (10.37 percent), Ramshorn Investment Inc. (6.08 percent), AVCG LLC (3.82 percent) and Mustang Road LLC (1 percent).
Caracol Petroleum is a wholly owned subsidiary of JK E&P Group Pte. Ltd., which is a wholly owned subsidiary of the Singapore-based tech firm JK Tech Holdings Ltd. TP North Slope Development is a subsidiary of Thyssen Petroleum LLC, a privately owned oil and gas exploration company based in the British Virgin Islands, with offices in Monaco and Houston and operations in the U.S. Gulf Coast. MEP Alaska is subsidiary of Magnum Energy Partners LLC, an exploration company based out of New York City.
Mustang Operations Center 1 is a joint venture between AIDEA (96 percent) and CES Oil Services Pte. Ltd (4 percent). Mustang Road is a joint venture between Caracol (55.3 percent), TP North Slope Development (34.2 percent) and MEP Alaska (10.5 percent).
The Southern Miluveach unit
A joint venture operated by Brooks Range Petroleum Corp. began exploring the area now known as the Southern Miluveach unit in 2010, after farming-in the North Tarn prospect covering six Eni Petroleum leases along the western edge of the Kuparuk River unit.
During the 2011 and 2012 exploration seasons, Brooks Range Petroleum drilled the North Tarn No. 1 exploration well, the North Tarn No. 1-A sidetrack and the Mustang No. 1 delineation well to test the Brookian formation and deeper Kuparuk formation.
Prior to the program, the company had estimated that the Brookian might contain some 35 million barrels of oil and that the Kuparuk might contain an additional 6 million barrels of oil. But the program pointed to a discovery in the range of 40 million barrels of recoverable oil from the Kuparuk - far bigger than expected. An independent audit by the global consulting firm DeGolyer and MacNaughton estimated that the so-called Mustang prospect contained proved gross reserves of 24.7 million barrels of recoverable oil. The firm also estimated that the field contained 43.6 million barrels of proved and probable reserves and 51 million barrels of proved, probable and possible reserves.
To help finance development, Brooks Range Petroleum partnered with the Alaska Industrial Development and Export Authority or two projects: a $25 million preliminary infrastructure program and a $225 million processing facility for the standalone field.
Through the deal, AIDEA contributed a portion of the costs in return for a certain rate of return and a small working interest ownership in the Southern Miluveach unit leases.
The financing helped Brooks Range Petroleum secure investment from private sector partners that acquired the company from AVCG and its partner Ramshorn Investments Inc. The new joint venture launched a development program - drilling and construction.
Delays
Although Brooks Range Petroleum initially expected to bring the Southern Miluveach unit into production by early 2016, a series of technical problems encountered earlier this year delayed development. Now, project startup is unlikely before the end of next year.
“Due to a myriad of mechanical and reservoir problems encountered while drilling during the period of the 2nd POD, none of the wells intended as producers were completed in the Kuparuk reservoir,” operator Brooks Range Petroleum Corp. told state officials in a proposed third plan of development for the unit, filed Sept. 1. After receiving the proposed plan, the state asked the company to provide additional information and had yet to approve or deny the revised development plan by the time The Producers went to print.
The problems largely involved subsurface conditions encountered during the drilling process earlier this year. The solution requires Brooks Range Petroleum to modify the drilling rig it had been using for the program or potentially find an alternative drilling rig.
Earlier this year, the company used Nabors rig 16E to drill the 9,140-foot SMU M-02 well, which was supposed to be the first of three planned development wells. The company cancelled a planned flow test “due to unfavorable petrophysical characteristics in the main pay zone” and completed the well for injection, as originally planned.
Next, the company used the rig to drill the SMU M-03 well to an intermediate depth of 7,231-feet, but “poor hole conditions in the intermediate section of the well” preventing the company from continuing the well to its total target depth. Instead, the company plugged the well back to its surface casing until it could develop a plan for re-entry.
Finally, the company returned to SMU M-01, which was a pilot hole drilled to an intermediate casing depth in 2012. The company planned to re-enter the well to add a horizontal lateral. During the first stage of drilling the lateral, “significant fluid loses were encountered,” which forced the company to plug the well at its intermediate casing.
After this third set-back, the company suspended operations for the season. A subsequent “root cause analysis” of the three drilling projects determined that the company needed to significantly modify its rig by installing Managed Pressure Drilling equipment before it could resume drilling. The equipment would “lower the risk of controlling overpressure in the reservoir while at the same time prevent massive lost circulation incidents.” As of early September, the company was considering bids from providers of the equipment.
Participating Area
The complications have delayed the project.
While Brooks Range Petroleum had previously projected first oil during the first quarter of 2016, the company is now forecasting startup to begin in the fourth quarter of the year.
As such, the company told state officials it would be premature to apply for a participating area, as required by the terms of the existing plan of development, until after the company successfully completes the planned drilling and completion activity. The company has asked the state to extend a March 31, 2016, deadline for applying to form the participating area. Without an extension, the unit would automatically expire.
The timeline for building and installing facilities is largely on track.
The company has built gravel roads and a gravel drilling pad, installed more than half of the piles for pipeline support and installed associated pipeline platforms, and ordered long lead materials and equipment for module fabrication and construction. Toward the end of this year, the company expects to receive oil and gas train modules and a gas conditioning module, all of which have been under construction since early this year.
2016 plans
Brooks Range Petroleum is proposing a two-well program for the coming year.
If the state approves the plan of development, the company said it would start the coming drilling season by re-entering the unsuccessful SMU M-01A sidetrack to drill and test a new lateral, to be called SMU M-01B. Then, “as economic conditions warrant,” the company would re-enter, finish drilling and possibly flow test the SMU M-03 well.
Once those wells were finished, the company would “evaluate continuing with the development drilling program” with an eye toward the revised timeline for start-up.
The current scope of development calls for as many as 38 development wells with 11 production wells, 23 injection wells and two optional grind and inject disposal wells.
While the state asked the company to elaborate on the difficulties encountered earlier this year and the plans for avoiding those problems in the future, the answers are proprietary.
The company told state officials that it spent $145 million during the current plan of development from December 2014 through November 2015 - $85 million on surface facilities and $60 million of drilling activities. Through an Alaska Industrial Development and Export Authority investment, the state contributed approximately $54 million to that total spending figure, with the remainder coming from the working interest owners. “This investment demonstrates Brooks Range’s commitment to moving the Mustang Field to development and the State’s vested interest through AIDEA in seeing this project come online to production,” the company told the state in a recent filing.
