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

The Explorers 2019: Resounding success at North Slope Badami well

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Glacier Oil and state officials upbeat on Badami; Starfish prospect one of several new promising pods in Killian sands

Kay Cashman

Petroleum News

Glacier Oil & Gas Corp. spent most of 2016 through 2018 methodically performing maintenance and well work at its four producing Alaska oil and gas units, as well as executing one of two exploration programs that might guide work in the years to come. The company’s 2018 capital budget for Alaska was a conservative $20 million, representing Glacier’s net working interest investment. (ASRC Exploration LLC, owned by the Native regional corporation for northern Alaska, Arctic Slope Regional Corp., holds a minority working interest in the Badami unit and surrounding leases.)

The first of those two exploration programs, the drilling of the B1-07 Badami well in early 2018, took the majority of its 2018 capex and resulted in an oil discovery in the undeveloped Starfish prospect southwest of the Badami development area in the Cretaceous Killian interval.

A turbidite sandstone reservoir slightly older than the Badami’s Brookian reservoir, the Killian is immediately above the oil source rock and below the Badami sands that form the main reservoir for the Badami field. In early testing the B1-07 well produced 2,500 barrels per day.

Production of the eastern North Slope Badami unit, which is just west of Point Thomson, between it and Prudhoe Bay, was 879 bpd in November 2015 prior to Glacier assuming operatorship in January 2016.

By January 2019, Badami was producing 2,323 bpd, with B1-07 accounting for 1,604 bpd. It came as no surprise when Glacier President Phil Elliott told Petroleum News in an April 10, 2019, email that “The B1-07 well was an economic success and proved the prospective value of a Killian-focused drilling initiative,” noting the well was expected to “pay out in less than 15 months.”

Describing the Starfish project in September 2017, a Glacier official said, “If this well works close to what we think it will, it should open five to seven more prospects similar to it.”

In its 2017 plan of development, or POD, filed with the Alaska Department of Natural Resources’ Division of Oil and Gas, Glacier described Starfish as one of “several new target pods of interest” identified through a recent geologic and geophysical review of the Badami and Killian sands.

In her May 2018 approval of the Badami unit’s 15th POD, then-Director Chantal Walsh said the division was “encouraged by the efforts undertaken” by Glacier “as shown through its continued production from Badami, its efforts to enhance production from existing wells, and its exploratory drilling.”

A new POD that Glacier will file in mid-April 2019 (after the deadline for this edition of Explorers magazine), “speaks for itself,” Elliott said in his April 10, 2019, email. The “basic plan calls for investing nearly $200 million (gross) to prosecute a Killian-focused drilling program over the next 3-4 years.”

Elliott did not indicate whether the company would be open to partners in that venture.

But it is interesting to note that within a year of the Starfish discovery, major North Slope exploration and development partners Oil Search and Armstrong Energy headed to the eastern North Slope to search for missed oil in a 195,000-acre block south and southwest of the Badami unit.

Fulcrum for development

Badami could serve as a fulcrum for future development in the area because its processing facilities were designed for production rates of up to 38,500 barrels of oil per day.

The Badami pipeline could transport oil from the region to the trans-Alaska oil pipeline - Hilcorp has already anticipated that crude production from its proposed Liberty field could use that pipeline. Hilcorp’s plans for Liberty development include a small artificial gravel island in the Beaufort Sea, some five miles offshore, about 15 miles east of Prudhoe Bay, with a buried subsea pipeline carrying sales grade oil to shore to connect with the existing Badami pipeline between Prudhoe Bay and Point Thomson.

New pad at Badami?

On Feb. 1, 2019, Glacier applied to the U.S. Army Corps of Engineers for a permit to construct an additional gravel pad for the Badami field to accommodate the drilling of up to 10 new wells.

The pad would be located inland 1.3 miles from Mikkelsen Bay.

The application said that pad construction would involve excavating a 9.2-acre gravel pit, constructing an 800-foot access road and a 2.5-mile pipeline connecting the new pad to the existing Badami facilities. The pad itself would be square, with 660-foot sides, and would be within the Badami unit, due east of the existing Badami pad.

The Mikkelsen Bay pad proposal dates back to a unit expansion effort in late 2012, when Savant, then the Badami operator, asked the state to add seven leases to the Badami unit, including six leases held by Alaska Venture Capital Group. Since that time AVCG has sold most of its interest in those six leases, with six companies now holding them, Caracol Petroleum being the largest leaseholder. Brooks Range Petroleum Corp. currently operates the leases.

The proposed lease expansion, which straddled the Beaufort Sea coast, would have extended the Badami unit east, closer to ExxonMobil’s Point Thomson producing unit, the eastern-most producing unit on the North Slope, just to the west of the ANWR 1002 area.

1971 well tested at 700 bpd

The concept behind the lease expansion was to enable exploration drilling in the East Mikkelsen prospect that at the time underlay a combination of Savant and AVCG leases.

The prospect included the site of the East Mikkelsen Bay No. 1 well, drilled by Humble Oil (predecessor to ExxonMobil) in 1971. Using outdated technology, that well encountered oil in the Killian sands, above the Hue shale source rock, with a tested flow rate of 700 bpd of 24 degree API oil.

In March 2013 the division approved inclusion of parts of two of the leases into the Badami unit but declined to expand the unit across the remainder of the seven leases: The approved expansion included the Mikkelsen well. The state argued that only those lease portions met the qualifications for a lease expansion.

In April 2013, Savant appealed the state’s decision, claiming that effective exploration of the prospect required access to all seven of the leases that had been included in the unit expansion application.

The appeal remained in limbo until July 2, 2018, when then-DNR Commissioner Andy Mack sent a letter to Glacier telling it the department had reviewed Savant’s appeal and was remanding the matter to the division for reconsideration.

As of April 5, 2019, the division had not yet made a decision.

The filing of Glacier’s application for a Mikkelsen Bay pad does not represent any firm commitment as to when, or whether, the company will build the pad, Elliott told Petroleum News Feb. 6, 2019.

He said his company was still in the process of formulating future plans for Badami, noting a permit of this type would typically run for around five years.

Glacier’s latest approved Badami POD, filed in April 2018, indicates the potential for further drilling at Badami, with an additional drilling pad likely to be needed to fully explore and delineate the unit.

Looking for Sabre partners

In addition to exciting Badami prospects on the eastern North Slope, Glacier’s most interesting Cook Inlet exploration prospect is Sabre at West McArthur River in an offshore corner of the unit.

Identified by both former Cook Inlet operators Unocal and Marathon Oil Co., Sabre was given different names by each company and finally named Sabre by Forest Oil. (Forcenergy Inc. acquired West McArthur River in 1997. Forest Oil Corp. became the operator in late 2000 after acquiring Forcenergy. In 2007, Forest sold the unit to Pacific Energy Resources Ltd., which sold the unit to Cook Inlet Energy in 2009.)

Glacier subsidiary Cook Inlet Energy first discussed plans for a Sabre exploration well as early as late 2013 but delayed the project due to the logistics and the approximately $25 million cost and difficulty of drilling an extended reach well from onshore facilities.

The arrival of a jack-up rig in Cook Inlet after decades of failed attempts improved the economics of the well by allowing for vertical drilling from an offshore site, so Glacier has included Sabre as a potential target for 2017, 2018 and 2019 activities in various government filings.

The current plan calls for using the Spartan 151 jack-up rig.

Glacier said it is seeking partners in the Sabre prospect.

A former Cook Inlet basin operator, Forcenergy, shot 3-D seismic survey over Sabre, describing it as a 50-100 million barrel prospect.

The Alaska Department of Environmental Conservation issued a key permit for the Sabre project in mid-May 2018. The pollutant discharge elimination system individual permit allows the company to discharge certain waste fluids from the Spartan 151 into upper Cook Inlet during its operations. The permit expires June 15, 2023.

Taking more methodical approach

Glacier Oil was created through the bankruptcy of former Miller Energy Resources Ltd. Through Miller’s subsidiary Cook Inlet Energy LLC, Glacier operates the Cook Inlet basin’s West McArthur River unit and the Redoubt unit on the west side of Cook Inlet and the North Fork unit in the southern Kenai Peninsula. Through subsidiary Savant Alaska LLC, it also operates the eastern North Slope Badami unit, making Glacier the only operator aside from Hilcorp Alaska with production in Alaska’s two major basins.

Unlike its predecessor Miller Energy, which had acquired multiple prospects throughout Alaska and eventually became overextended when commodity prices dropped, Glacier has been taking a gradual, more cautious approach by focusing on maintenance and workover activities to improve operations at existing wells. The company has reserved its larger resources for targeted projects such as drilling the B1-07 exploration well and taking on one of the largest infrastructure projects in the history of the West McArthur River unit by shifting processing to the Kustatan Production Facility.

Kustatan was newer and larger than the West McArthur River Production Facility and capable of handling greater production volumes. Glacier also discontinued use of high-pressure oil injection jet pumps at West McArthur, simplifying operations and increasing overall field safety.

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