Great Bear Petroleum is chomping at the bit, eager to move ahead with a program of source rock oil test drilling on Alaska’s North Slope. But the company still needs a drilling rig for its planned exploration and evaluation plans and is also waiting for approval of permits that it needs, Ed Duncan, Great Bear’s president and COO, told Petroleum News Nov. 21.
The company plans to drill through the region’s three major source rock intervals to obtain rock samples and do some testing. The idea is to determine whether oil can be produced direct from those sources on the North Slope using the same style of horizontal drilling and hydraulic fracturing that has proved so successful for unconventional oil and gas production in the Lower 48 states.
The company has formed a joint venture with oil services company Halliburton, in which Halliburton will do some of the test drilling within a limited area of Great Bear’s leases — Great Bear and Halliburton are each permitting three wells to be drilled from six drill sites along the Dalton Highway.
Needs a rig
Duncan said that the company is considering several different rig options for its planned drilling. He said that, although he could obtain the use of a North Slope rig, he is currently leaning toward the possibility of obtaining from the Lower 48 what is referred to as a “hybrid rig,” a modern rig design that can be used both for conventional drilling with rigid drill pipe and for coiled tubing drilling.
“We’re looking at that rig design as the way to go,” Duncan said.
Rigs of this type can operate more efficiently in a shale oil operation, and having a dedicated rig would also offer the advantage of not having to “fight the rig market” in Alaska, Duncan said.
However, a Lower 48 rig would have to be winterized for Alaska conditions. And Great Bear is looking into how a rig might be best modularized for moving by trailer in an Alaska operation, Duncan said.
Making rig modifications and shipping the rig to Alaska might delay the start of Great Bear’s drilling by a month or two, but the efficiency of the custom designed rig would enable the company to recoup lost time once the drilling is under way, Duncan said.
However, Duncan said that, given the millions of dollars of commitment involved in contracting a rig, including the potential to have to pay standby day rates, Great Bear will not close on a rig contract without reasonable certainty of obtaining all of the permits that it needs.
“We don’t have that kind of capital to throw around,” he said.
Permitting challenge
Great Bear has found permitting to be the biggest single challenge in moving its project forward, although the company does now think that the permitting is progressing well, Duncan said. And the Parnell administration has been helpful in clarifying issues and facilitating the permitting process, he said.
“We’re feeling very, very positive,” Duncan said.
Duncan said that the North Slope Borough had made some challenging comments on the permits but that he thought that his company has done a good job of addressing the borough’s concerns. The permitting process and its associated comment periods provide opportunities for people to put ideas and agendas on the table — Great Bear has “tried to be really open from day one, being clear about what we’re trying to do,” Duncan said. Duncan said that in general Great Bear has received positive comments on its plans from North Slope communities.
And when it comes to environmental impacts, a source rock oil development has some flexibility over the exact locations where wells need to be drilled — Great Bear anticipates a surface footprint of less than 0.5 percent of the land surface, Duncan said.
Test the rocks
Great Bear’s plan is to initially drill vertically through the three main North Slope source rock intervals — the Shublik, the lower Kingak and the Hue shale/GRZ — to test and sample the rocks. This initial drilling would be followed by the drilling of lateral wells from the vertical well bores, with hydraulic fracturing then used to enable short term production tests. And, given that the drilling will be done from already existing gravel pads, the company hopes to be able to conduct the lateral drilling phase of its program in the summer, to take advantage of the extensive daylight and summer weather, Duncan said.
The objective of the program is to run short tests on at least four wells, with those tests potentially leading to the sanctioning of a pilot plant to more fully determine the production characteristics of the rocks, Duncan said. It will be necessary to obtain at least a one-year production profile, determining parameters such as production decay characteristics, as well as assessing the economic feasibility of oil production from the rocks, before making a decision to move to full field development, he said. That sequence of events could lead to full-field development in 2015, he said.
But the eventual timing of the development program will depend on the results from the early drilling, he said.
Great Bear sees the Shublik as its prime target for source rock oil production, given the similarity between that rock and the productive Eagle Ford shale in Texas. However, the company will sample the other North Slope source rock intervals during its drilling program and it does not discount the possibility of oil production from either of these other intervals as well as from the Shublik.
Duncan said that he is confident that Great Bear will be drilling into the “kitchen” where the source rocks are “generating oil.” The fluid pressure gradient with depth will be somewhat higher than normal, a factor also likely to support effective oil production, he said.
Geologic uncertainty
But until the company drills some wells and conducts some tests, the potential productivity of any of the source rocks remains unknown. And there is geologic uncertainty associated with likely variations in productivity around the source rock play.
Great Bear is working to implement a 3-D seismic program in its acreage, to reduce some of the uncertainties associated with drilling, Duncan said.
When it comes to developing a shale oil play in Alaska, Duncan sees finding a skilled workforce to meet all of the work needs as a primary challenge. He has been promoting GeoForce, a program to encourage school students to pursue high-value technical careers. The program has been introduced in Alaska in conjunction with the University of Alaska Fairbanks.
Great Bear wants to exclusively hire Alaskans, but that will be a huge training challenge, Duncan said. North Slope source rock oil development will be a 25 to 30 year phenomenon — it is important now to excite eighth to 10th grade students on the North Slope about future career possibilities close to home, he said.
—Alan Bailey
