Back in February, managers for Eni Petroleum were explaining to Alaska industry regulators how plunging oil prices and other complications had shifted their fast-track Nikaitchuq oil field development on Alaska’s North Slope into a lower gear.
Now the Italian oil and gas firm is back with essentially the same strategy, but with a new set of dates for first oil from Nikaitchuq.
Even though the first barrels are now slated to come a year later than Eni originally projected, it’s plain from the company’s latest development plan that Nikaitchuq is a sophisticated project with an aggressive timeline.
Eni filed the plan with the state Division of Oil and Gas on July 20. It’s the second such plan the company has submitted for the field, which is centered in the shallow, nearshore waters of the Beaufort Sea north of the giant Kuparuk oil field.
A review of the two plans reveals Eni hasn’t changed course very much. The project still involves producing Nikaitchuq’s heavy, viscous oil from two drill pads, one offshore and one onshore. The number of wells remains essentially the same.
While Eni’s initial development plan of May 2008 had first oil flowing by the end of this year, the updated plan sees first oil by Dec. 31, 2010.
State officials, still reviewing Eni’s new plan, are glad to see Eni back on track.
Eni is one of the “shining stars” of state efforts to encourage a greater diversity of companies working on the North Slope, said Nan Thompson, units manager in the Division of Oil and Gas.
“They are very good to work with,” she said.
Project’s significanceRome-based Eni is a global oil and gas player and one of Italy’s largest companies.
It arrived on the scene in Alaska in the fall of 2005 with the acquisition of North Slope leases from Armstrong Oil & Gas of Denver. Eni had a 30 percent stake in Nikaitchuq, but in April 2007 the company took full control of the field in acquiring Anadarko’s 70 percent.
Eni is working to become only the second independent oil producer on the North Slope, and the fourth company overall to operate an oil field in the region.
The first independent, and currently the only operator other than giants BP and ConocoPhillips, is Pioneer Natural Resources, which started up its small offshore Oooguruk field in summer 2008. Eni holds a 30 percent stake in that development.
Nikaitchuq is a bigger and more complicated project than Oooguruk. Unlike Pioneer’s approach with Oooguruk, which sends its crude into the ConocoPhillips-operated Kuparuk field for processing, Eni is developing Nikaitchuq as a standalone project with its own processing facilities located at Oliktok Point.
Eni has said Nikaitchuq is a $1.45 billion project with recoverable reserves estimated at 180 million barrels. That’s a sizeable amount of oil, though small relative to major North Slope fields such as Prudhoe Bay and Kuparuk, which so far have produced well in excess of 11 billion and 2 billion barrels of oil respectively.
Nikaitchuq in the Inupiaq language means “perseveres” or “keeps trying.”
‘A more normal pace’In its latest development plan, Eni attributes the project slowdown earlier this year to more than just the plunge in oil prices over the final months of 2008.
“A variety of factors, including but not limited to schedule delays, not meeting sealift deadlines, capital constraints and fabrication delays have caused Eni to change the pace of development for the Nikaitchuq Unit from an accelerated pace of development to a more normal pace,” the plan says.
Part of Eni’s problem was Hurricane Ike, which caused a work stoppage last September at a Louisiana fabrication yard making oil processing and operations modules for sealift to Alaska, Division of Oil and Gas records show. Barging equipment through icy Arctic Ocean waters to the North Slope is limited to a narrow window each summer.
Much work, however, has been completed on Nikaitchuq.
Three gravel work pads already have been built, as well as an elaborate subsea pipeline and part of an overland pipe to feed Nikaitchuq oil into the Kuparuk pipeline.
The first Nikaitchuq production well also was drilled this past winter, and is currently shut-in until production equipment is ready, Eni’s development plan says.
Two drill sitesEni’s plan includes two drills sites, one on land at Oliktok Point and the other on a gravel pad installed in six feet of water along the inner shore of Spy Island, a barrier island off the North Slope coastline.
Eni, in its initial and revised development plans, has not significantly varied the number of wells it plans.
At Oliktok Point, Eni expects to drill seven oil producer wells and eight injector wells targeting the OA Cretaceous sands within the Schrader Bluff formation. All the wells will be directionally drilled from Oliktok Point into the Nikaitchuq acreage offshore, Eni’s latest development plan says. The wells will include horizontal sections of 6,000 to 10,000 feet through the reservoir.
Nabors rig 245-E will do the drilling, to commence in the first quarter of 2010, the development plan says.
Aside from the producers and injectors, up to six water supply wells and one well to dispose of drill cuttings will be required. Eni already has installed a grind-and-inject module at Oliktok Point.
“Water injection in the Nikaitchuq field development will play a fundamental role in well production and reserve exploitation,” the plan says. The water will help maintain reservoir pressure, which can enhance oil recovery.
A plant to separate the oil, gas and water coming in from Nikaitchuq wells will share the gravel pad at Oliktok Point. The Nikaitchuq operations camp will occupy a separate pad.
First oil from the Oliktok Point drill site is expected by Dec. 31, 2010, Eni’s plan says.
At Spy Island, 24 producing wells and 24 injector wells are planned into the Schrader Bluff sands. Three additional wells might be drilled to target minor oil accumulations in the Triassic Sag River formation sandstones.
No rig has been lined up yet for the Spy Island drilling, which is scheduled to begin in the third quarter of 2011 with first oil from the offshore site expected by Dec. 31 of that year, Eni’s development plan says.
The pipelinesOne of the most impressive aspects of the Nikaitchuq project is the buried 3.1-mile “offshore flowline bundle” linking the Spy Island drill site to the processing facility at Oliktok Point.
Eni already has installed the subsea bundle, which features an oil production pipe within a pipe plus a lot more. Eni’s initial development plan provided details: “The bundle will transport three phase fluids from the drill site to the facility, provide arctic heating fuel to the island for fuel and well treating, water for reservoir injection, electrical power and communications cables.”
In terms of leak detection, a pressure change in the outer pipe will signal a possible breach of the inner pipe, Eni says. Further, a fiberoptic cable in the bundle will be able to detect temperature changes that might indicate a leak.
Eni is not the first to lay such a multipurpose line on the sea floor off the North Slope. Pioneer put one in for its Oooguruk project.
To carry processed Nikaitchuq oil to market, Eni also plans to complete a 14-mile onshore pipeline tying into the Kuparuk pipeline. The 14-inch line was about 20 percent done when construction was suspended, but work will resume later this year, Eni says. Meantime, fabrication of modules for processing well fluids is ongoing in Louisiana, with a sealift planned for next summer, the company says.