There are a lot of mixed messages in Alaska oil and gas exploration at the moment.
The recently completed winter exploration season generated only one well and an associated sidetrack at the Horseshoe project, although Accumulate Energy Inc. was still planning to drill its Icewine No. 2 well as this issue of the Explorers was going to print.
Either way would give 2017 the smallest North Slope well count since 2011.
But while exploration drilling has been sluggish for several years now, exploration results have rarely been as exciting. Between early 2016 and early 2017, Armstrong announced a 1.2 billion barrel discovery between its Pikka unit and the associated Horseshoe prospect; Caelus announced a 6 billion to 10 billion barrel discovery in Smith Bay; and ConocoPhillips announced a 300 million barrel discovery at its Willow prospect. If developed, those three discoveries would impact North Slope development for decades.
A small number of wells and a large number of discoveries would seem to suggest a disparity between outlook and reality. But more likely it represents the oddities of Alaska, where only a few companies are operating in a region with large opportunities.
To better understand the state of Alaska exploration, consider four trends:
The first trend is the Nanushuk formation.
The major discoveries of the past year were all in the Nanushuk or the closely associated Torok formation, and are believed to represent a new type of play on the North Slope. Early indications suggest that the next few years could led to more discoveries in this Brookian play, as companies directly target those two formations with exploration wells.
The second trend is increased activity from Alaska Native corporations.
After decades of relying on private sector companies, Ahtna Inc. took the lead on exploration activities in the Copper River region near Glennallen this past year. ASRC Exploration LLC finally operated its first North Slope exploration well after nearly two decades as an informal “apprentice” to other North Slope operators. And Doyon Ltd. continues to see opportunities for an oil and gas discovery in the Nenana basin. The company is currently partnering on its exploration program with Cook Inlet Region Inc.
The third trend is the ongoing story of unconventional oil exploration.
Both Accumulate Energy Inc. and Great Bear Petroleum Operating LLC have decided to accompany their longer-term desire to develop source rock on the North Slope with near term conventional exploration as a way to develop infrastructure and generate cash flow.
The fourth trend is the expansion of existing developments.
Although exploration activity in the Cook Inlet basin has been lagging recently due to commodity prices, market conditions and bankruptcies, four companies have plans (or at least desires) to explore around existing developments: BlueCrest Alaska Operating LLC, Furie Alaska Operating LLC, Glacier Oil & Gas Corp. and Hilcorp Alaska LLC.
And on the North Slope, Eni U.S. Operating Co. LLC has been quietly permitting a proposed Nikaitchuq North project to explore in federal waters near its Nikaitchuq unit.