Vol. 25, No.06 Week of February 09, 2020
Providing coverage of Alaska and northern Canada's oil and gas industry

Yukon Gold 2021 well possible; Jade gets 100% WI in Sourdough

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Petroleum News

88 Energy Ltd. doesn’t have much new to say about its eastern North Slope prospect, but it’s hard to believe a partnering deal isn’t in the works, given the activities of nearby leaseholders - in particular Jade Energy and ExxonMobil, which will likely bring infrastructure within 10 miles of the 1994 untapped Yukon Gold oil discovery.

Australian independent 88 Energy Ltd. says in its Jan. 20 fourth quarter release that while Yukon Gold “discussions continue with nearby resource owners” to “optimize the monetization strategy for existing discovered resources” in the vicinity and that permitting for a new well in 2021 is “underway,” the company also says drilling is “subject to farm-out.”

Those discussions must be serious because 88 Energy did not have a booth at NAPE in early February, while almost all the other companies looking for partners for their Alaska prospects did.

When asked for more details about the discussions with nearby leaseholders, David Wall, managing director of 88 Energy Ltd., told Petroleum News in a Jan. 29 email, “We have not disclosed anything related to the discussions and will not do so at this time,” a common response from an oil company while in negotiations.

When asked for the kind of permitting that had begun, he said, “Standard work related to permitting. We have not submitted any permits yet,” also typical until full project funding has been secured.

Eighty-six million barrels of oil

88 Energy Ltd.’s main Alaska subsidiary is 88 Energy Alaska Inc., which in turn has three subsidiaries - Regenerate Alaska Inc., operator of the Yukon Gold acreage (now referred by the company simply as its Yukon leases); Captivate Energy Alaska Inc. which drilled the Winx 1 North Slope exploration well last winter; and Accumulate Energy Alaska Inc., which is drilling the Charlie 1 exploration well this winter.

Per Alaska’s Division of Oil and Gas January 2020 lessee detail report, Regenerate holds eight state leases in the Yukon Gold prospect area, encompassing 15,234.71 contiguous acres.

The company acquired 3D seismic over what it calls its “Cascade prospect” in the Yukon leases in 2018 and, “on final processing and interpretation, high-graded” the Yukon Gold prospect from a “lead to a drillable prospect.” The main target of new drilling will be the Tertiary Canning formation.

88 Energy said the Cascade prospect was “intersected peripherally” by Yukon Gold 1, drilled in 1993-94 by BP, and classified as an historic oil discovery.

88 Energy said the mean prospective resource for the prospect is 86 million barrels of oil. A November presentation breaks down the prospective unrisked oil resource as follows: Cascade Canning/Fan net mean of 82.3 million barrels; PETM1 Staines Tongue/Topset 6.2 million barrels; PETM2 Staines Tongue/Topset 1.1 million barrels.

Sourdough, Yukon Gold, ANWR 1002 area

88E’s top executive in Alaska for Captivate and Accumulate is Anchorage-based general manager of operations Erik Opstad, a state of Alaska certified professional geologist, who has worked the North Slope for more than 34 years.

Wall directly oversees Regenerate.

Opstad is also 50% owner and manages Jade’s operations. 88 Energy does not own any part of Jade, which is operator of the Sourdough prospect, a few miles north and a little east of Yukon Gold.

Both Sourdough and Yukon Gold are on the border of the 1002 area of the Arctic National Wildlife Refuge. The 1002 area is 1.57 million acres in a narrow strip of coastline that was set aside because of its petroleum potential by Congress in 1980 when the 19 million-acre refuge was created.

The Sourdough and Yukon Gold prospects are thought to hold oil pools that cross under ANWR’s current border - a border that is disputed by the state of Alaska and currently being litigated in front of the U.S. Bureau of Interior’s Interior Board of Land Appeals (see Petroleum News stories “No limit on IBLA’s ANWR ruling” in the Feb. 2, 2020, issue and “ State/fed ANWR border battle wages on; IBLA decision slides into 2020” in the Jan. 26, 2020, issue).

The Sourdough and Yukon state leases along the border include acreage in what is officially the ANWR 1002 area.

But whether IBLA rules in the state’s favor or not, Jade and Regenerate can already tap the oil on their leases under ANWR, thanks to the court-tested “rule of capture” law which allows lessees to drill on a state lease and have the right to what that drilling produces, even though it might be drained from adjacent, undrilled, federal land.

Sourdough drilling next winter

As part of the 2012 settlement between the state of Alaska and the working interest owners of the ExxonMobil operated Point Thomson unit, an East Pad was to be built, an East Pad well drilled and an additional well drilled in the unit.

The state has since agreed that the requirement will be fulfilled through a deal between ExxonMobil and Alaska independent Jade Energy, which is scheduled to drill a new well in the untapped Sourdough oil prospect on a Point Thomson lease in first quarter 2021, utilizing some existing unit infrastructure for its operations.

The well, Jade No. 1, had been planned for first quarter 2020, but because Jade was not able to get into the Point Thomson unit’s service pier in summer 2019, the appraisal well had to be deferred until early 2021.

Jade No. 1 will be drilled on state lease ADL 343112 in area F, Tract 32, of the unit, which is the most southeasterly lease in Point Thomson.

The lease holds two mid-1990’s Sourdough oil discovery wells that were drilled by BP, which estimated Sourdough held 100 million barrels of recoverable oil.

Point Thomson operator ExxonMobil and the other major working interest owner, BP Exploration Alaska, both assigned their full working interests in ADL 343112’s Tract 32 to Jade, retaining a small overriding royalty. The deal gave both North Slope producers some skin in the game, fully aligning them in delivering a successful Sourdough development.

As of Oct. 31, Jade held a 95% working interest in the lease, leaving just ConocoPhillips and its 5% interest in the Point Thomson unit.

On Feb. 4, Opstad said that ConocoPhillips transferred its 5% working interest in ADL 343112 to BP, which was approved by Alaska’s Division of Oil and Gas effective Nov. 1.

“That said, BPXA is obligated under an existing farmout agreement to transfer that interest to Jade Energy LLC, a process now underway. Once that transfer becomes effective later this year, Jade will have 100% working interest in Sourdough,” Opstad said.

By building a 70,000 barrel per day liquids export pipeline at Point Thomson that connects to the Badami unit and thus moves oil and condensate to Pump Station 1 of the 800-mile trans Alaska oil pipeline, ExxonMobil improved the development economics of other oil prospects to the east. In addition to Sourdough, those prospects include Yukon Gold, Donkel and Cade’s Stinson and any future production from the 1002 area.

Based on analysis of Jade No. 1 data, which will be drilled in early 2021, the division’s then-acting Director James Beckham said April 4, 2019, that Jade “will move forward accordingly with additional development at Area F and adjoining areas” in the following winter drilling season (2022) and that the overall economic feasibility of a field development program at Area F would be considered following that drilling.


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