NordAq Energy Inc. is one of only four companies actively working in the two major Alaska basins - the North Slope and Cook Inlet - and almost certainly the smallest.
This winter, the Anchorage-based company launched a one-well exploration program at the Tulimaniq prospect in Smith Bay off the coast of the National Petroleum Reserve-Alaska while progressing two programs in Cook Inlet - the Shadura prospect in the Kenai National Wildlife Refuge and the Tiger Eye prospect in the Trading Bay region.
NordAq arrived in the Cook Inlet region with a wave of independents in early 2010 by picking up state acreage at lease sales and acquiring Cook Inlet Region Inc. leases. The principals of the company have been well known in the Alaska oil industry for years. NordAq President Bob Warthen boasts nearly 45 years of Cook Inlet experience, including a quarter century of senior management for Union Oil Company of California.
After pulling together its two Cook Inlet exploration programs, NordAq is now being funding through a partnership with the Chinese private investment group Chinanx. The firm agreed to invest $90 million and provide a $150 million debt facility to help NordAq develop “gross unrisked potential recoverable reserves” of 1.2 billion barrels of oil and 115 billion cubic feet of gas across its Alaska portfolio, according to the companies.
Following FEX
After several years focused exclusively on its Cook Inlet properties, NordAq began amassing its leasehold across the North Slope at lease sales in 2011, 2012 and 2013.
The acreage was concentrated in Smith Bay and the northwest planning area of the NPR-A. Those areas are far from existing North Slope infrastructure. Smith Bay is roughly 150 miles from Kuparuk River unit Drill Site 2P and some 70 miles from Barrow. The NPR-A leases were even more remote, with some as far as 200 miles from Drill Site 2P.
Exploration in the region would be hard to justify if not for its impressive geology.
In 2006, Division of Oil and Gas geologist Paul Decker described the area as a natural oil trap where Brookian topset sands come up against shale in an ancient incised canyon. The region is famous for oil seeps in the Cape Simpson area, which Decker said were likely to have originated from an “oil kitchen” to the north in the lower Cretaceous source rock system known as the HRZ. That would put the Smith Bay “area squarely in between the kitchen and the seeps,” Decker told Petroleum News at the time. “So you probably have a pretty good plumbing story to be able to charge this with nice light oil.”
All told, the acquisition bucked the recent trend of companies pursuing relatively small accumulations near existing developments in favor of a larger and more difficult find.
The Talisman Energy Inc. subsidiary FEX explored a similar region in the 2000s, commissioning a seismic survey in Smith Bay and drilling three NPR-A wells - Amaguq No. 2, Aklaqyaaq No. 1 and Aklaq No. 6. The company found oil at all three wells, and later touted a sizeable reserve potential, but left the state toward the end of the decade without pursuing development. The company was disheartened by the challenging logistics of the region and an inconsistent federal leasing program. The company plugged and abandoned Amaguq No. 2 and suspended Aklaqyaaq No. 1 and the Aklaq No. 6.
While FEX considered Amaguq No. 2 to be “subcommercial given current infrastructure,” the company pegged the “initial estimate of contingent resources present” at the two suspended wells between 300 million and 400 million barrels net to FEX, which had an 80 percent working interest in the leases. The wells had encountered more than 225 feet of net hydrocarbon-bearing sandstones, according to FEX. Talisman also touted “significant follow-up potential on many similar structures on Talisman’s acreage if commercial productivity is proven,” based on log analysis and “strong gas and oil shows, including oil staining and free oil in the drilling mud in one of the wells.”
NordAq permitted an eight-well program running over two winters - 2013-14 and 2014-15. The proposal included 14 potential well locations: 10 Tulimaniq wells in Smith Bay and four NPR-A wells - Aklaq Nos. 2A and 6A, Aklaqyaaq No. 1 and Amaguq No. 2A. While the company hoped to begin drilling in the region in early 2014, logistical issues forced the company to delay its exploration work by one year.
In late 2014, NordAq proposed a one-well program for the coming winter. The Tulimaniq No. 1 exploration well near the delta of the Ikpikpuk River would be a vertical stratigraphic test well to collect rock samples and conduct a vertical seismic profile, according to the company. Should the well encounter liquid hydrocarbons, the company said it would conduct a flow test to evaluate hydrocarbon performance characteristics.
The results of the first well would determine future drilling, the company said.
The proposal drew opposition from a coalition of environmental groups worried about the potential impact of exploration in the Teshekpuk Lake region, among other concerns.
The Alaska Oil and Gas Conservation Commission issued a permit for Tulimaniq No. 1 in late February 2015. NordAq is using the Doyon Arctic Fox rig to drill the well.
Headway at Shadura
As it pursues that big North Slope prize, NordAq is also working on two projects in Cook Inlet: Shadura in the Kenai National Wildlife Refuge and Tiger Eye near Trading Bay.
The Shadura prospect is west of the Swanson River field, on subsurface land owned by Cook Inlet Region Inc. The Alaska National Interest Lands Conservation Act created a mechanism for CIRI to allow access to lands within the refuge for resource development.
After building an ice road through the Kenai National Wildlife Refuge, NordAq spud the Shadura No. 1 exploration well in February 2011 using the Glacier No. 1 drilling rig.
The well primarily targeted natural gas objectives in the upper and middle Tyonek formation between 11,000 and 14,500 feet, and included a secondary target in the shallower Beluga formation between 6,000 and 11,000 feet, according to state filings.
Toward the end of the year, rumors swirled about a potentially large discovery. NordAq announced a “significant natural gas discovery” in November 2011 and later suggested that the prospect could produce up to 50 million cubic feet per day over 30 years. The company later tempered any excitement by saying that the 50 million cubic feet per day figure measured the “facility design volume,” rather than the actual production volume.
By April 2012, NordAq was proposing a flow test and an appraisal well to assess the discovery, followed by a six-well development program. Although Warthen warned that the appraisal well might take as long as two years, because the 16,000-foot directional well would require a fairly large rig, he appeared to be serious about moving forward.
“We wouldn’t be here if it’s not a go. Going through an EIS process is not inexpensive,” he said, referring to the federally mandated environmental impact statement process.
The comment proved to be prescient.
A draft EIS presented a two-phase development plan. NordAq would build a short gravel access road and a “minimal” pad to support one well in June 2013, which the company would either expand or remove and remediate, depending on the results of the well. The goal was to bring the field into production by June 2014, selling the gas into the pipeline connecting the Tyonek A platform to the Kenai liquefied natural gas plant.
The 538-page final EIS proposed five alternatives for development, including NordAq’s preference. Among the remaining alternatives were plans for accessing the prospect from the south or the east, respectively, out of the Hilcorp-operated Swanson River unit.
NordAq believed these options would have made the project economically or logistically unfeasible, which would have violated the ANILCA provision allowing development.
While acknowledging that the two alternatives were “not ideal from NordAq’s perspective,” the U.S. Fish and Wildlife Service believed that both were “feasible.” In July 2013, the agency allowed NordAq to pursue its preferred development scheme.
The decision allowed NordAq to start on the Shadura No. 2 appraisal well, which the company believes is key for determining the viability of the project. With an eye toward seasonal restrictions in the refuge, the company had said it intended to start building the gravel road in mid-July and start drilling in mid-September, according to the company.
Those plans were delayed for unknown reasons. In late September 2014, the Alaska Oil and Gas Conservation Commission issued a drilling permit for the well. As of early 2015, the Shadura No. 2 (23-19) well had yet to appear as “completed” in AOGCC reports.
Tiger Eye moving slowly
Around the time NordAq announced the Shadura discovery in late 2011, it also launched an exploration program at the Tiger Eye prospect, located on the west side of Cook Inlet.
The company initially proposed a one-well program targeting the Tyonek and Hemlock formations in an area about 1.8 miles southwest of the Trading Bay facilities. In May 2012, the company expanded the program, proposing two exploration wells toward the end of summer and commissioning a 3-D seismic survey over the area in early 2013.
With its leases set to expire at the end of September 2012, NordAq asked the state to form the Tiger Eye unit over two leases covering some 8,480 acres. The application proposed a two-well program - the Tiger Eye Central No. 1 well in the second quarter of 2013 and the Tiger Eye North No. 1 well in the second quarter of 2014. The wells would have started from the same pad to different bottomhole locations, one in each lease.
The company revised its application in August 2012, switching out Tiger Eye North No. 1 for the Tiger Eye Central No. 2 well, which had a bottomhole location slightly to the east. The revision also sped up the deadlines by nine months to a year - the third quarter of 2012 for Tiger Eye Central No. 1 and the second quarter of 2013 for Tiger Eye Central No. 2. The revised application maintained the early 2013 timeline for shooting seismic.
The Alaska Department of Natural Resources approved a 7,680-acre unit in October 2012 and required NordAq to drill an initial well at the unit by the end of the year.
As part of the application process, Apache Alaska Corp. asked the state to include three of its adjacent leases into the unit, saying they shared a reservoir. The state rejected the request, saying Apache did “not conclusively prove that the potential hydrocarbon accumulation” extended onto its leases, which meant there was “no evidence that Apache has an interest in the potential hydrocarbon accumulation to be included in the unit.”
The adjacent Apache leases expired at the end of their primary term in May 2013. The leases included Shell’s Kustatan River No. 1 and PanAm’s Bachatna Creek No. 1.
Shortly after getting the unit, NordAq used Nabors Alaska Drilling Rig 106AC to drill the Tiger Eye Central No. 1 well, targeting the Tyonek and Hemlock formations.
The company amended the Tiger Eye unit plan of operations in early 2013 to include additional exploration and development activities. The changes envisioned expanding the TEC-1 pad to accommodate a 60-man camp and production facilities, constructing the TEC-2 pad and connecting the two pads by road, as well as conducting exploration activities. The plan called for drilling as many as eight 4,000-foot wells on the TEC-1 pad before expanding it and potentially bringing the pad into production by October 2013.
The NordAq portfolio includes other prospects, including Anakema and Akema.
Anakema is located offshore of the Kenai Industrial Center, roughly halfway between Shadura and Tiger Eye. The two leases in the prospect are set to expire in February 2018.
Akema is southeast of Shadura. The one lease in the prospect expires in April 2017.
