Savant Alaska has completed its 27.5-mile ice road from the eastern end of the North Slope road system to the Badami field, in preparation for the company’s winter drilling program at Badami, Savant executive Greg Vigil told Petroleum News Jan. 6. The company plans to finish an oil exploration well it began last winter in the Denver independent’s Red Wolf prospect, in the western part of the shut-in Badami unit.
The ice road, begun on Dec. 3 and completed on Jan. 4, followed an inland route that enabled road construction to be finished 70 days earlier than the road on sea ice that Savant constructed in 2009, thus substantially increasing the length of the winter drilling window, Vigil said. The inland route has avoided the problems with thin ice, storm surging and rerouting for polar bear dens that Savant had to contend with last winter.
Cooperative effort
But the cooperation and efficiency of everyone involved in the road construction also contributed to this year’s rapid progress, Vigil said.
“One significant factor that contributed to our early, safe and environmentally compliant completion of the tundra winter road was the professionalism, responsiveness and cooperation of the various regulatory personnel at the Alaska Department of Natural Resources and the North Slope Borough in their review, processing and authorizations of the numerous permits, amendments and administrative approvals necessary to conduct the work,” Vigil said. “Our contractors, CH2M Hill and Cruz Construction, also did an excellent job in constructing the road ahead of schedule and on budget.”
As part of a 2008 farm-in deal with BP to improve oil recovery rates at Badami, which BP temporarily shut down in 2007 because of exceedingly low production rates, Savant also plans to drill Badami’s first redevelopment well this winter.
All drilling is being done from Badami’s single, compact pad, B1, which also holds the unit’s production facilities.
The Red Wolf B1-38 well is primarily targeting oil in the Middle Ellesmerian Kekiktuk formation, a deeper and older geologic formation than the Brookian turbidite sands where previous Badami development by BP occurred from six vertical and near-vertical wells.
The redevelopment well will be a sidetrack to BP’s existing B1-18 vertical well, utilizing horizontal well construction
Depending on “observed results” Savant might prepare for a well production test or for a hydraulic fracture treatment at a later date, Vigil told Petroleum News Dec. 16.
Just 2,600 feet left to drill
This winter’s ice road inland route, which starts 10 miles east of Prudhoe Bay at the edge of the causeway to the Endicott oil field and roughly follows the Badami pipeline corridor, not only adds time for drilling at the beginning of Savant’s program, but also reduces the risk of having to wrap up operations ahead of schedule at the end of the season, which Savant had to do last spring due to unusually warm weather that caused early breakup along the Sagavanirktok River, over which ran Savant’s 2008-09 ice road — a road it built and shared with ExxonMobil for that company’s Point Thomson operations east of Badami.
Last winter Savant drilled its Red Wolf exploration well to a measured depth of 12,835 feet and set intermediate casing.
“This winter we have approximately 2,600 feet left to drill to test the Kekiktuk formation,” Vigil said.
BP’s highly efficient Endicott field produces oil from the Kekiktuk, and Red Wolf is down-trend from BP’s Beaufort Sea, 100 million-barrel Liberty project, in the same fault block as Liberty’s discovery well.
In a January 2009 interview with Petroleum News, Vigil said Savant’s “most likely reserve estimate” for the Kekiktuk accumulation was 45 million barrels.
Initially, before it ran into technical production problems with the highly compartmentalized Brookian reservoir, BP hoped to recover 120 million barrels of oil from those sands, which sit about 2,000 feet above the Kekiktuk.
Shale fracturing technology
Operator BP had hopes of producing 30,000 barrels per day from Badami, but while early production ramped up as expected, it soon fizzled, dropping to only about 1,400 bpd by 2003 and 900 bpd in 2007.
In a 2008 letter, Kevin Banks, director of the State of Alaska’s Division of Oil and Gas, said that Savant “is a capable third party based on its experience drilling an Alaskan exploration well (offshore Kupcake well, near Liberty, in early 2008) and applying new fracturing technology in low permeability shales.”
Depending on what it finds at this winter’s Brookian sidetrack, Savant is looking at combining horizontal drilling with hydraulic fracturing — pumping large volumes of fluid into the ground to crack the formation — to try to improve the oil flow from Badami’s Brookian sands.
Hydraulic fracturing has been tried before at Badami, but only on traditional vertical wells.
ACES working well for Savant
As part of its agreement with BP, Savant is evaluating the re-start of Badami production, but its investment decisions are influenced by the state’s current production tax regime, commonly referred to as ACES. Rumors that changes in ACES, Alaska’s Clear and Equitable Share, will be considered in the 2010 session of the Alaska State Legislature are worrisome, Vigil said in December. So worrisome that Savant has, for the first time, hired a lobbyist.
“We’ve engaged David Parish & Associates, just to make sure our presence is known … to make sure legislators know we are exploring on the North Slope largely because of ACES.
“The state’s qualifying capital expenditures and net operating loss credits are paramount to … our exploration effort in Alaska. … They are a great incentive for us to continue to explore in the state,” Vigil said.
“Certain ACES provisions are very important and serve their purpose well. Adverse changes to those parts of ACES would not be good for small producers and explorers and are of concern to us.”
The company’s “Badami plant re-start analysis is particularly sensitive to potential ACES changes,” he said. “We can’t do an economic model that we can trust if legislative changes are in the works. … The uncertainty increases our risk.”
As is, ACES allows smaller producers to have “a severance tax credit if they produce less than 50,000 Btu equivalent barrels a day — the first $1 million per month of severance tax liability is exempt if you are a small producer on the North Slope.”
Without that relief and the tax credits, Vigil said, “barring the discovery of new reserves (such as at Red Wolf), the financial risk associated with resuming production from the existing reserves at Badami would be too great.”
And the progressive tax rates under ACES would render the Badami work uneconomic, were it not for the fact that the Badami field infrastructure and export pipeline are already in place, Savant said.
Savant Resources, parent to Savant Alaska, is active in the Bakken shale in North Dakota, the New Albany shale in Kentucky and in the Mancos shale in Colorado.
Last winter Savant used Doyon Rig 16 at Badami; in 2010 it will be using Doyon Rig 15.
