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Explorers 2011: Oil, gas and UCG for Linc Energy Using conventional resources for unconventional exploration to produce gas from deep coal deposits Eric Lidji For Petroleum News
Linc Energy Alaska Inc. is taking an untraditional approach to Alaska.
The Australian independent is primarily interested in developing the prodigious coal resources in the state in an unconventional way, and is using conventional gas prospects to fund that effort. The company drilled its first well in Alaska in 2010, but is planning to significantly increase in operations in the state in 2011 and especially in 2012.
Linc is primarily interested in underground coal gasification, or UCG.
UCG involves creating a synthesis gas underground in coal seams too deep to mine traditionally. By injecting air and water into an ignited coal seam, an operator can prompt a chemical reaction that rearranges the carbon and oxygen into methane, or natural gas.
Internationally, Linc is following a strategy that combines UCG with gas-to-liquids technology to produce valuable liquid hydrocarbons from these deep coal deposits.
Limited optimism at LEA No. 1 Linc arrived in Alaska in March 2010, acquiring 123,000 acres from San Francisco independent GeoPetro Resources Inc. Throughout the year, Linc acquired additional leases and continued permitting work for a well in the Point Mackenzie area.
That acreage included state, Cook Inlet Region Inc. and Alaska Mental Health Trust leases near Point Mackenzie and in the Trading Bay region on the west side of the inlet.
Using infrastructure inherited from GeoPetro and its own momentum, Linc spud the LEA No. 1 well in October 2010, less than nine months after arrived in the state.
Linc drilled to 6,323 feet and encountered “a number of gas bearing horizons” and “a number of significant coal seams,” but decided the structure was “too tight” to produce without “swabbing” the well with large amounts of formation water.
However, Linc said the region “appears to be highly suitable for UCG.”
“I’m disappointed about the final result of LEA No. 1, but in the scheme of opportunity and activity that is currently ongoing within Linc Energy globally, LEA No. 1 represents only about 1 percent of the opportunities we are currently pursuing around the globe,” Linc Energy CEO Peter Bond said in May. “At the end of the day exploration is a numbers game, the more smart wells you drill the more likely you are going to be successful. Linc Energy has an extraordinary record of getting our exploration targets right the majority of the time and I still think the coal measures we’ve discovered via the LEA No. 1 program will add a lot of value to the Company in the longer term.”
Undiscouraged, Linc announced that it would move ahead on plans to drill another exploration well, this time in the Trading Bay region on the west side of Cook Inlet.
That well would use existing roads to follow up on drilling in the region by Shell Oil in the 1960s that encountered natural gas while in pursuit of a deeper oil target in the region.
UCG exploration drilling While it pursues natural gas in Cook Inlet, Linc is also pursuing coal across Cook Inlet and the Interior, and crude oil in the foothills of the Brooks Range Mountains.
In February 2011, Linc received a UCG exploration license from the Alaska Mental Health Trust Land Office covering 181,414 acres across three areas of the state.
The Mental Health Trust proposed a seven-year license at $1 per acre. If the licensing leads to leasing, the Trust proposed to offer the land for an initial five-year term at $4 per acre per year that could be extended for another five more years by production.
Before the license, Linc estimated that its Alaska leases overlaid some 20 billion tons of “known” coal deposits. It has called the potential of the license area “extraordinary.”
Linc recently announced plans for a three well exploration campaign in the license area.
The company planned to drill the TYEX01 well in September on its 25,375 acres in the Tyonek area, some four miles west of Beluga on the west side of Cook Inlet. The company said the coals of interest are based on Phillips Petroleum Co.’s 1973 North Tyonek State 58848 No. 1, just northwest of TYEX01, as well as some information gathered from Superior Oil Co.’s 1967 Three Mile Creek No. 1, southwest of TYEX01.
Then, Linc plans to drill the HEEX01 well in late January on its 60,270 acres in the Interior some seven miles north of Healy. The well would target the Suntrana formation coal seams in the Usibelli group, but without previous deep exploration drilling in the region, Linc said its estimates for drilling depth are based on structural geologic analysis.
For both wells, Linc plans to use the Tester Simco 4000 drilling rig to drive conductor casing some 300 feet and the Boart Longyear coring rig to core approximately 3,500 feet.
Linc plans to acquire new 2-D seismic data in the license area near HEEX01, but said the proposed well site does not appear favorable for a structural or stratigraphic trap for natural gas. The results of the survey, though, will help define the depth and thickness of gravel in the region and the depth of the thicker coals of interest to UCG, Linc said.
Linc also holds 82,123 acres of the exploration license on the Kenai Peninsula.
Umiat exploration, at last? While Linc pursues overlooked conventional natural gas prospects and unconsidered deep coal prospects, it is also going after one of the oldest oil discoveries in Alaska.
In June, Linc paid $50 million for controlling interest in the Umiat oil field by purchasing 100 percent of Renaissance Alaska LLC, which held an 84.5 percent interest in Renaissance Umiat LLC, which in turn holds a 100 percent working interest in the Umiat oil field and an 80 percent net revenue interest in the project.
The 19,358-acre prospect covers four leases — two state and two federal — along the boundary separating state-owned land in the central North Slope from the National Petroleum Reserve-Alaska, some 80 miles west of the trans-Alaska oil pipeline.
The U.S. Navy discovered Umiat in 1946 and the field is believed to hold about 1 billion barrels of oil in place, but remoteness, low reservoir pressure and permafrost have kept it from being developed. With improved technology, the permafrost and pressure can be managed, and now with the state studying an all-season road from the Dalton Highway to the Umiat area, the prospect is suddenly looking more realistic.
Renaissance staked 10 wells in the Umiat area in late 2007, but couldn’t secure funding for a drilling program. Renaissance shot seismic in the area, allowing it extend the terms of the federal leases. The company also asked the U.S. Bureau of Land Management to include an Umiat development scenario, along with accompanying transportation and infrastructure projects, in its upcoming integrated activity plan for the NPR-A.
As of Oct. 30, Linc was still looking for a drilling rig, with plans to drill up to five wells at Umiat this winter.
“We will be using a packed snow road for access. We do not have an agreement with Anadarko for cost sharing, though we are working on a road sharing agreement with them for a portion of our snow road that will be co-located with theirs. … Rigs are tight but we are making headway,” a company official told Petroleum News.
The company leases nearly 117,000 acres of state land in Alaska, and has an office in Anchorage. Project manager Corri Feige is the top person for Linc in Alaska.
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