Vol. 24, No.21 Week of May 26, 2019
Providing coverage of Alaska and northern Canada's oil and gas industry

The Explorers 2019: Jade cuts deal with Point Thomson owners to drill Sourdough

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First new well in eastern North Slope prospect along 1002 border scheduled for early 2020, ExxonMobil keeps 2% overriding royalty

Kay Cashman

Petroleum News

For years industry observers saw production at the untapped Sourdough oil discovery on state land next to the border of the Arctic National Wildlife Refuge as key to opening ANWR’s 1002 area to oil and gas exploration and development because geologists thought the Sourdough oil pool ran under the border. The court-tested “rule of capture” law would have allowed a landowner such as the state of Alaska and its lessees to drill on a state Sourdough lease and have the right to what that drilling produced, even though it might be drained from adjacent, undrilled, federal land.

While the Trump administration took the first step by planning two 1002 lease sales, the first targeted for October 2019, it now appears a new Sourdough well and its approved state plan of development could be even closer to tapping federal oil, with the well scheduled for early in the winter of 2020.

The Sourdough lease and its two mid-1990’s BP discovery wells lie in the North Slope’s Point Thomson unit. In November 2018, PTU operator ExxonMobil assigned a 63% working interest in ADL 343112’s Tract 32 to Alaska-based independent Jade Energy LLC, retaining a 2% overriding royalty.

This most southeasterly PTU lease with the legacy Sourdough discovery wells runs along the western edge of the 1002 area, which is a narrow strip of coastline set aside for potential development by Congress because of its hydrocarbon-rich geology.

Sourdough is estimated to hold 100 million barrels of recoverable oil, per a 1997 BP press release.

Minor POD problems

In its justification for requesting the divided interest assignment, Jade told Alaska Department of Natural Resources’ Division of Oil and Gas it would “pursue drilling operations on the newly-created segment, as part of a farm-out agreement” with ExxonMobil, then-Division Director Chantal Walsh wrote in a Nov. 13, 2018, letter, noting Jade would also become a party to the Point Thomson Unit Agreement.

According to state Division of Corporations filings, Jade’s members and managers are Anchorage-based Erik Opstad and Castle Rock, Colorado-based Greg Vigil, who each owned 50% of the company.

Opstad, who oversees Jade’s operations in Alaska, is a state of Alaska certified professional geologist who has worked the North Slope for 34 years, including a stint with BP in various roles and as a principal and general manager of Savant Alaska.

The new plan of development, or POD, proposed for ADL 343112 was spelled out in the two-year Point Thomson Unit 2018 Area F POD, submitted Dec. 21, 2018, to the division by Jade. Although Walsh formally told the unit working interest owners - ExxonMobil, BP, ConocoPhillips, Colt and Jade - in a Dec. 27 letter that the POD “as submitted” was incomplete, that fact “in no way triggers the release of Area F acreage.” She said Dec. 21, “remains the date of submittal” for purposes of the Point Thomson Unit Settlement Agreement with the state, which dates back to March 29, 2012.

In other words, the Dec. 21, 2018, submittal satisfied the requirement that a POD be submitted for Area F before year-end 2018, per the unit’s settlement agreement, even though the submittal was deemed incomplete.

Jade submitted an amended POD on Jan. 24, 2019, which the division deemed complete on Feb. 4, 2019. Jade provided a technical presentation on the POD on March 4, 2019, and submitted amended versions of both the public and confidential portions of the POD on March 19 and March 29, 2019, respectively.

An April 4, 2019, a division decision signed by James Beckham, acting director, approved the 2019 Area F POD for a period of one year.

More wells possible in 2020-21

Beckham noted that Area F consists of approximately 7,647 non-adjacent acres in the northeastern and southeastern corners of the PTU, reiterating that Jade was majority owner and operator of PTU Tract 32, ADL 343112 in the southeastern portion of Area F.

Based on analysis of the appraisal well data, he said, Jade “will move forward accordingly with additional development at Area F and adjoining areas in the 2020–2021 winter drilling season. Current plans include drilling an additional lateral into the Brookian reservoir and production testing. The need for additional delineation wells and the overall economic feasibility of a field development program at Area F will be considered following the 2020–2021 season.”

Proposed early 2020 drilling

The POD turned in by Opstad called for targeting Brookian oil reserves, which was the kind of play found in the Sourdough prospect discovery wells.

Within the PTU, Brookian reservoirs were “generally interpreted as amalgamated lowstand channel fill and basin-floor fan deposits,” the POD said, pointing out that “typically” these reservoir sands in the area were “predominantly” found onshore at depths between 11,000 feet and 12,000 feet true vertical depth, TVD.

New seismic 3-D data was acquired over the Sourdough area by Jade during the 2017-18 winter season, which the company was having evaluated, per the POD.

Jade was also “seeking to access additional seismic data and has engaged a well-known consultancy to assist interpreting that data.”

When that work was finished the company said it would select an “optimized” well location “to further evaluate the deliverability of the Brookian reservoir,” and further delineate “both the vertical and areal extent of the oil accumulation.”

The well would be drilled in the first quarter of 2020 and access to the well site would require construction of an ice road. Jade told the division in updated filings it would utilize existing PTU infrastructure to conduct its operations, per an agreement with PTU operator ExxonMobil.

The company intended to gather data from the vertical pilot hole, such as mechanical drilling parameters, LWD data, wireline logs, sidewall and conventional cores, VSP and check-shot information or drill stem test data, the POD said.

Such information would be “used to determine the suitability of the encountered stratigraphic reservoir section for horizontal well construction. Jade feels that that the deployment of horizontal production wells is a critical element in commercializing the Point Thomson unit Brookian opportunity in Area F, as well as its adjoining areas,” the POD said.

“Once a vertical pilot hole is drilled, the well will be plugged back and drilled at a high angle into the Brookian reservoir for completion and an extended production test. Production data gathered at this time would be used to analyze the economic viability of a field development program,” per the POD.

At the conclusion of this evaluation the well would be plugged and abandoned or suspended.

Upon completion of drilling and extended production testing, analysis of the data “will be integrated into the Jade 3-D Brookian seismic model.”

With those results in hand, a second POD would be prepared and submitted by Jade to the division by Dec. 1, 2020.

Work done to date

As part of the development plan Jade outlined work done to date, noting the Brookian reservoir in Area F had been delineated and characterized by five wells that were drilled in and around the Point Thomson unit since the mid-1970s.

Three of the wells were in the northeast corner of the unit and were summarized as follows in the POD:

* Alaska State A-1 on ADL 047556 was drilled by Exxon and reached a 14,206-feet TVD in September 1975 and was plugged and abandoned. That data was available to the public from the Alaska Oil and Gas Conservation Commission, or AOGCC.

* Alaska State A-2 is immediately adjacent to Alaska State A-1 and was drilled as a cutting’s disposal well by Exxon in 1995 to 2,364-feet TVD and was plugged and abandoned in March 2002.

* Exxon spud Alaska State G-2 from ADL 343110 and directionally drilled the well north to reach a bottom-hole at 14,340-feet TVD within ADL 343109 in August 1983. The well was subsequently plugged and abandoned, but AOGCC granted the well extended confidentiality.

The other two wells that characterized Point Thomson’s Brookian reservoir were Sourdough 2 and 3 and were summarized as follows in Jade’s POD:

* BP drilled Sourdough 2 to 12,562-feet TVD in March 1994 and the well was plugged and abandoned.

* In 1996, Sourdough 3 was drilled by BP reaching 12,475-feet TVD in March 1996. The well was suspended. AOGCC granted both wells extended confidentiality.

Vintage seismic

Various 3-D seismic surveys have been acquired and interpreted over acreage in Area F, including: Point Thomson 3-D in 1989, 70 square miles, with Exxon the operator; Yukon Gold 3-D in 1994, 95 square miles, with BP the operator; and Mammoth 3-D in 1997, 13 square miles.

“Generally speaking, the quality of all these data sets are good and they have been used by the working interest owners to gain a broad overview of the Point Thomson unit Brookian reservoir,” the POD said.

Jade has had “access to the Point Thomson 3-D volume and has used that data set to help it characterize the Brookian opportunity at Point Thomson as well.”

Stringing the pipeline pearls

A topic of conversation about the Eastern North Slope over the years has been the importance of Point Thomson and its pipeline infrastructure that connected it with the Badami line to the west and ultimately to the trans-Alaska oil pipeline at Pump Station No. 1.

Point Thomson was the most important pearl in a string of prospects between the central North Slope and the border of the 1002 area.

The pipeline infrastructure was especially important to leaseholders with undeveloped oil prospects farther east than Point Thomson, such as Sourdough, Yukon Gold, Stinson and ultimately any future activity in the ANWR 1002 area.

As of March 31, 2019, the PTU line was capable of shipping 70,000 barrels of liquids per day, but could be expanded, PTU owners have said.

Editor’s note: See related story about 88 Energy and its Yukon Gold prospect in this issue of the Explorers magazine.

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