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Vol. 12, No. 46 Week of November 18, 2007
Providing coverage of Alaska and northern Canada's oil and gas industry

THE EXPLORERS 2007: Armstrong, Total back in the game

Kay Cashman

Petroleum News

An affiliate of Denver-based Armstrong Oil and Gas and a subsidiary of Paris-based Total S.A. returned to Alaska in 2007.

When independent Armstrong Alaska LLC and Houston-based major Total E&P USA Inc. left the state in 2005 and 2004 respectively, they both said they might be back. But this time the two companies returned to different areas.

Armstrong, which had leases onshore and offshore the North Slope and been an active minority partner in drilling several exploration wells, returned to buy leases in Southcentral Alaska’s Cook Inlet basin, initially onshore. Total, which had owned leases and drilled an exploration well in the National Petroleum Reserve-Alaska, returned to buy leases in the federal waters of the Beaufort Sea, offshore the North Slope.

More deals to come

The first indicators that Armstrong was back were in July 2007, but it wasn’t until September that the new affiliate, Armstrong Cook Inlet LLC, confirmed it had taken over as operator of the North Fork gas unit from Gas-Pro LLC.

The top executive of all the Armstrong companies, Bill Armstrong, said the North Fork deal, which included the 640-acre unit and nearly 18,000 acres of surrounding and nearby leases, was just the first deal of possibly several more to come.

“We are looking to get active in the Cook Inlet,” Armstrong said. “We think it’s a good time to explore for gas in the Cook Inlet. … We’re looking forward to doing more deals. … Assuming we’re successful, we’ll be doing what was typical for us on the North Slope — a combination of wildcat and development drilling.”

The Armstrong CI team is “essentially” the same as the North Slope team, he said, which included Ed Kerr, Stu Gustafson and Matt Furin.

Pursuing aggressive development

Armstrong CI amended North Fork’s 42nd plan of development to pursue what it describes as “aggressive” development of the nonproducing unit’s natural gas. The amended plan includes drilling a 9,000-foot Tyonek delineation well by March 31, 2008.

Armstrong Vice President Ed Kerr told the state Division of Oil and Gas that Armstrong CI would drill a delineation well in the spring, which Kerr said was needed to evaluate the Tyonek reservoir and ensure “continuous uninterruptible commercial gas production.”

Armstrong is also working on an “agreement in principle” with Enstar to build “a 15-mile pipeline from North Fork’s existing gas well to the KKPL,” provided Armstrong is able to “drill and test a reasonable amount of gas out of the delineation well,” Kerr told the state. The Kenai Kachemak pipeline is the most southerly gas pipeline on the Kenai Peninsula.

Kerr pointed out that no one has been able to persuade Enstar or any other party to construct a pipeline to the North Fork unit, largely because there is only one well in the unit.

Curtis Thayer, director of corporate and external affairs for Enstar, told Petroleum News Sept. 24 that his company sees Armstrong as the most likely candidate to be the first producer to offer gas for sale from the southern Kenai Peninsula. This would motivate Enstar to build 4- to 6-inch transmission lines connecting the existing Cook Inlet basin gas grid to the southern peninsula, he said.

The Anchorage-based utility would like to first connect into the KKPL and then build a line south to the City of Homer.

Kerr said North Fork was the first step for Armstrong CI “playing a larger part in providing natural gas to Southcentral Alaska.”

The three companies Armstrong Alaska brought to the North Slope in 2002-05 were Pioneer Natural Resources, Kerr-McGee and Eni.

Total never lost Alaska focus

Even though the French major left Alaska in 2004, it continued to study the state’s potential, vice president of Total E&P USA’s Corporate Division Tom Ryan, told Petroleum News in April 2007.

“It’s never been an area that Total abandoned. When we closed our office we were, at that time, finished with our last project there and did not have anything to go after, but we didn’t change our focus. Our geologists completed their analysis … and continued to work on their model,” Ryan said, which is an “evolving” effort.

“Alaska has never been off our agenda.”

Total entered Alaska in 2002 when it picked up leases in NPR-A and later opened an Anchorage office.

The company drilled on its NPR-A Caribou prospect in the winter of 2003-04. Unhappy with the results, Total closed its office and for all intents and purposes left the state.

Francoise in charge of Alaska

Since Total left Alaska in 2004, the company has sold or traded all its onshore acreage in the United States, concentrating instead on Gulf of Mexico deepwater plays.

But that’s “not suggesting Total wouldn’t look at onshore” in Alaska, Ryan said.

When asked if the company was interested in the Bristol Bay or Cook Inlet areas, Ryan said, “I’m not at liberty to say, but we’ve done a large regional model so it would cover other areas as well.”

Total does not have any immediate plans to open an office in Alaska. Rather the company’s exploration office in Houston, which is headed by Denis Francoise, will be in charge of its new Alaska assets.

“Denis Francoise will be in charge of refinement and further evaluation of those blocks. They have long-term implications. But we’re not going to be opening an office in the near future or finding a replacement for someone like Jack Bergeron until we firm up our plans,” Ryan said. Bergeron headed up Total’s operations in the state from 2002 to 2004.

When asked if a seismic program was a possibility in the near future, Ryan said, “That’s a good question.”

“We’re glad to be back and look forward to working with the people of Alaska on the North Slope and elsewhere. We look forward to establishing new relationships, and building on those we left behind,” he said.

North of Point Thomson

The leases Total picked up when it returned to Alaska were offered in the April 18, 2007, U.S. Minerals Management Service Beaufort Sea lease sale. Total won 32 tracts for $2.2 million in the eastern sale area, north of the former Point Thomson unit, which had the only contested tracts in the sale.

Shell and Total picked up contiguous and somewhat intermingled acreage north of the Kuvlum and Hammerhead discoveries, where Shell took a large number of tracts in the 2005 sale. (Shell has since changed Hammerhead’s name to Sivulliq and is looking to drill and develop it.)

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