Vol. 25, No.13 Week of March 29, 2020
Providing coverage of Alaska and northern Canada's oil and gas industry

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Jade’s plan schedules Sourdough work to maintain economic viability

Kay Cashman

Petroleum News

A couple of days after it was filed on March 17 Alaska’s Division of Oil and Gas approved Jade Energy’s second Plan of Development for the Sourdough prospect on the southeastern edge of the Point Thomson unit.

Jade is both the majority owner of and operator of PTU Tract 32 in Area F of the eastern North Slope lease ADL 343112.

Tract 32 holds two mid-1990’s oil discovery wells, Sourdough 2 and 3, that were drilled by BP, which at the time estimated the prospect held 100 million barrels of recoverable oil.

The essential difference in Jade’s new POD, which covers the period April 1 through Dec. 31, is to drill the first new Sourdough appraisal well, Jade 1, in the winter of 2021-22, versus next winter. Jade worked closely with the division to come up with a plan that maintained the economic viability of the project, which is the furthest east of all North Slope developments.

Division Director Tom Stokes told Petroleum News March 23 that during the discussions with Jade the issue of low oil prices never came up. Rather, the drilling delay is due to scheduling challenges, such as barging in equipment and ice road construction, both of which can only be done during different specific and limited periods of time.

Working the issues

Jade initially submitted its second POD on Oct. 2, but on Nov. 29 Stokes granted an extension of the first POD until March 31 to give Jade and the division time to consider several issues related to the economic viability of the proposed project.

Initially, the division requested resubmittal of the second POD by Jan. 31, 2020, but in subsequent email correspondence between Jade and the division, the resubmittal date was extended to give them more time.

During this period, Jade also continued to work on permitting, which began this past summer.

On Feb. 29, Jade’s exploration/appraisal program oil discharge prevention and contingency plan application package was deemed complete by the Alaska Department of Environmental Conservation.

Southeastern portion of Area F

Area F of the PTU was created by the terms of the Point Thomson Unit Settlement Agreement between PTU operator ExxonMobil and the other owners. Area F consists of 7,647 non-adjacent acres in the northeastern and southeastern corners of the PTU.

Jade became majority owner and operator of PTU Tract 32, ADL 343112, in the southeastern portion of Area F, by agreement with ExxonMobil Alaska Production Inc. in mid-2018.

Potential Brookian reservoirs have been encountered by numerous wells that have been drilled in and near the PTU since the 1970s. Sourdough 2 was drilled to a true vertical depth of 12,562 feet and was plugged and abandoned. Sourdough 3 was drilled to 12,425 feet TVD and was suspended.

In addition to the data derived from these wells, various 3D seismic surveys have been acquired and interpreted over Area F.

Jade acquired new compressive sensing imaging, or CSI, seismic 3D data from the area during the 2017-18 winter season with parameters optimized to characterize Brookian strata. The CSI 3D survey was the first of three field studies.

Dredging needed

In the first POD, Jade identified a series of 12 goals for 2019.

“Generally speaking, we fully or partially achieved 92% of the goals … while 8% of the targets were missed. The misses were largely the result of new information provided by the second field study conducted by Jade to support appraisal operations,” the company said in its March 17 filing.

In that case, a Bathymetric survey of the PTU service pier approach showed that dredging of the sea-bottom would be required to land a barge carrying the drilling rig.

Not only was it too late in the 2019 summer season to organize and execute such a dredging operation, but the campaign would require Jade to obtain a federal permit from the U.S. Army Corps of Engineers, potentially a six-month exercise.

Based on its interpretation of area data, Jade planned to drill the Sourdough appraisal well in the winter 2020-21 drilling season utilizing existing PTU infrastructure to conduct its operations, supported by the construction of additional Jade infrastructure, such as an ice road. However, given the circumstances, Jade was unable to deliver on its goal of mobilizing a rig, equipment and materials to Point Thompson.

Therefore, in August Jade elected to delay its drilling program by one year - a delay that “has in no way diminished Jade’s enthusiasm for the project and we continue moving forward on numerous fronts,” the company said in its second POD filing.

Third field study

In September Jade conducted its third field study to “evaluate suitability of the proposed Jade 1 drillsite,” which included a helicopter survey of the ice road alignment between the PTU road system and the drill pad.

Jade launched a program designed to interface with state and North Slope Borough stakeholders that would ultimately deliver a full permit package for the proposed project.

The company’s administrative goals and objectives for the second POD do “not differ dramatically” from those in the first POD.

Seismic data evaluation will continue in order to fully characterize the resource. Some of the work will focus on selecting additional delineation and development well locations particularly in any “expansion” areas that may be added to ADL 343112 resources through negotiations with the other PTU working interest owners, Jade said.

Well design, permitting and putting together third party agreements will also continue, including designing and permitting for drilling Jade 1 in the 2021-22 winter season.

Jade expects to submit its Sourdough Plan of Operations in second quarter, addressing its plans in detail.

Unique opportunity

The company’s plans to mobilize a drilling rig to Point Thomson by barge from the Deadhorse area presents a “unique opportunity to capture significant savings versus what would typically be spent on a traditional ice road focused rig mobilization scenario,” the company said.

“Capturing such savings is key to the economic viability of the project. However, given seasonality drivers, many important tasks are limited to being executed only during very specific calendar windows; barging requires open water, ice road construction requires -20°F temperatures and getting men and equipment to the Jade 1 drillsite requires both conditions,” Jade said.

Summer 2020 activities

This summer Jade plans to continue its wellsite work and permitting, including developing detailed construction plans for the ice road and the Jade 1 drill pad. Additionally, it will move to secure necessary equipment and contract services required to buildout its infrastructure. One specific field task will be the August installation by helicopter of several satellite link enabled thermistor stations along the ice road alignment and drill pad that will report ground temperature at various depths and snow cover to assist in construction planning.

A second bathymetric survey of the PTU service pier approach will be conducted by survey contractor HDR to confirm conditions ahead of a summer 2020 Corps permitted dredging campaign. Alternatively, Jade may use Bell and Associates to run a similar survey from sea ice earlier in the year which would provide data ahead of breakup.

The dredging operation will follow later in the summer.

Winter 2021-22 drilling

The Jade 1 drilling campaign in the winter of 2021-22 will utilize a medium sized mono-body rig - either Nordic Rig 3 or a similar unit. Weighing approximately 2.7 million pounds Nordic Rig 3 is a significant barge load, but once landed the rig will move efficiently using existing infrastructure and newly constructed Jade ice roads and arrive ready to drill with little additional rig-up work, Jade said.

“With its own secondary containment, the rig presents and environmentally responsible package, particularly when underlaid by a Polystar berm system. The rig features a split pipe shed that allows casing to be run on one side and drill pipe run on the opposite side. Automated pipe handling equipment raises and lowers tubulars into either side of the pipe shed. Capable of standing back 16,000-feet of 4" drill pipe and hoisting 464,000 pounds the rig is ideal for medium depth appraisal well programs such as Jade 1,” the company said in its March 17 filing.

Jade intends to drill a vertical 8½-inch borehole to approximately 12,750 feet. Drilling to that depth will penetrate “all of the prospective Brookian sand target that lay between 11,000 feet and the Hue Shale at ~ 12,500 feet while provide sufficient rat-hole to support subsequent wireline logging.”

Formation evaluation will employ a combination of logging while drilling, or, LWD, and wireline logging, or WL, programs that will include the extraction of rotary sidewall cores, Jade said.

“Given the probability of success, Jade expects to run casing, perforate the zone or zones of interest, then flow back the well for 24-hours. Naturally the testing program details will be dependent on the formation characteristics of the section penetrated,” the company said.

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