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THE EXPLORERS 2006 - UltraStar well on BP’s drilling schedule UltraStar looks to drill Dewline Deep prospect west of Point McIntyre, working on facility access deal with BP Kay Cashman & Alan Bailey Petroleum News
Jim Weeks, managing member of sister limited liability companies Winstar Petroleum and UltraStar Exploration, said in mid-October 2006 that UltraStar is getting closer to drilling its Dewline Deep prospect west of Point McIntyre on Alaska’s North Slope.
UltraStar wants to have an access agreement for the use of the processing facilities at the nearby BP-operated Lisburne field and a suitable drilling rig before it drills a well.
Negotiations over facility access have proved very slow, although Weeks emphasized that everyone was cooperating and that an access agreement was close.
In mid-October 2006, BP told Weeks the Dewline Deep well was “slotted in” to their drilling schedule, but there is “still no more news on the access agreements,” he said.
Alaska-based UltraStar plans to drill Dewline Deep from the Point McIntyre No. 1 drill pad. The Point McIntyre pad is on the coast and BP has a self-imposed restriction to only drill from the pad during the winter, when the Beaufort Sea is frozen over.
”We’ve got a window from (approximately) Nov. 1 to June 1,” Weeks said.
Sister company Winstar spud its first well, the Oliktok Point State No. 1 in June 2003.
That well came up dry.
Winstar and UltraStar have pioneered negotiating the potential use of existing North Slope facilities for handling production from a new, third-party field. When planning to drill the Oliktok Point well Weeks negotiated a deal that encompassed everything from exploration drilling to eventual production through the nearby Kuparuk facilities.
Weeks thinks it’s essential to have the commercial arrangements for producing and selling oil in place before exploration drilling takes place because without the use of existing facilities, which are privately owned by Alaska’s largest producers, it would be uneconomic to develop the modest sized accumulations that Winstar and UltraStar seek.
But the negotiations with the Kuparuk participating area owners for potential Oliktok Point production took nearly three years to complete, in part because the big producers saw the negotiations as low priority, Weeks thinks.
“(But) they’re clearly willing to put agreements together to enable a little guy like us to do something up there. It just took us a long time to put the deal together at Kuparuk,” Weeks said in May 2005.
One difficulty turned out to be that the Kuparuk deal required 100 percent agreement with all Kuparuk participating area owners, ConocoPhillips, BP, Unocal, Chevron and ExxonMobil.
And then there were complex negotiations regarding compensation for backouts, the volumes of deferred facility owner production that result from accommodating third-party production.
Charter for Development Weeks sees a document called the Charter for the Development of the Alaskan North Slope, signed between the State of Alaska, BP and ARCO in 1999, as critical for small companies wishing to explore on the slope.The charter obligates BP and ConocoPhillips to provide access to their North Slope facilities for third-party satellite fields on “reasonable commercial terms.”
And there’s a requirement for binding arbitration in the event of stalled negotiations.
“Without the charter we wouldn’t even be here,” Weeks said.
The charter also requires BP and ConocoPhillips to purchase oil from small producers, thus enabling these producers to avoid the need to establish costly shipping arrangements for their oil.
Another provision of the charter, a requirement that BP and ConocoPhillips make seismic data available for license, has proved vital for Winstar and UltraStar. It’s simply too expensive for a small company to shoot 3-D seismic over a small lease area on the North Slope, Weeks said.
And this 3-D seismic proved to be the critical factor in finding the new Dewline Deep prospect — UltraStar obtained some additional seismic from the Prudhoe Bay owners to pinpoint the prospect. That seismic increased the coverage from eight square miles to 23 square miles, a critical factor in tying seismic times to depths under the permafrost, Weeks said.
But don’t expect another major oil field. Although the prospect shows good potential, the oil accumulations are likely to be modest in size — the drilling isn’t going to find 100 million barrels, Weeks said .“At Gwydyr Bay the Ivishak has notoriously small fault traps.”
But what’s considered a very small field on Alaska’s North Slope — five to 20 million barrel range — is a big coup anywhere else in the country. And at today’s oil prices.
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