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Producers 2023: BlueCrest returning to Cosmo drilling
Hiatus could end this year pending permitting and financing
Eric Lidji for Petroleum News
BlueCrest Alaska Operating LLC expects to soon resume drilling operations at its Cosmopolitan unit after a three-year pause. The reasons for the pause are known: a pandemic, oil price fluctuations, and uncertain financial markets and tax regimes.
The thin silver lining is easy to overlook. With that extra time, BlueCrest has already designed the well it wants to drill. All it needs is financing and final regulatory approval.
The regulatory approval is more challenging than usual, given the nature of the well.
The Alaska subsidiary of the Texas-based independent is looking to restart its drilling program at Cosmopolitan with the H10 Trident Fishbone, a technically complex well intended to maximize the reach of a surface well with numerous subsurface laterals.
The innovative well design has a single wellbore that branches into three subsurface "fishbone" wells, each with eight distinct laterals. All told, that means 24 individual wells, each requiring separate drilling permits from various state agencies, particularly the Alaska Oil and Gas Conservation Commission. "AOGCC has been really responsive and good to work with. They're keen on new technology," BlueCrest Alaska President and Chief Executive Officer John M. Martineck told Petroleum News in late 2022.
In its most recent plan of development, the company said it hoped to begin drilling this year and believed it could spud the well "within several months" of receiving funding.
Permitting In early 2023, BlueCrest filed an amendment to its Oil Discharge Prevention and Contingency Plan, announcing its expectation of increased oil production rates in expectation of the additional wells. A C-plan is a crucial early permitting document.
As this issue of The Producers was going to press in mid-September 2023, the AOGCC had not posted any new drilling permit applications at Cosmopolitan on its website.
With those regulatory matters underway, BlueCrest also needed to resolve financing.
"The challenge to get financing is largely because of the way the State handled the tax credits," Martineck told Petroleum News, adding, "Companies, including BlueCrest, spent millions on exploration but then could not collect from the State. - Some sold tax credits at a drastically reduced price to other companies to get funds to stay afloat- the State also cancelled the tax credit program we were counting on from the start."
The H10 Trident Fishbone is primarily targeting oil accumulations but is expected to encounter natural gas, as well. BlueCrest plans to sell associate gas into the local market.
Beyond that immediate project, though, BlueCrest is also interested in a distinct gas play in the Tyonek formation at Cosmopolitan. Martineck described the play as "the largest known underdeveloped structure in the Inlet." Developing the prospect would require a new offshore platform with a new pipeline back to shore, meaning that any gas production would be at least two-to-three years beyond the start of development work.
History The offshore Cosmopolitan unit sits just off the coast of the southern Kenai Peninsula.
One of the essential decisions facing any operator of the unit was whether to develop it through some offshore drilling solution -- like a new platform or a jack-up rig -- or whether to attempt to reach the reservoir from an onshore pad using directional drilling.
BlueCrest came to Alaska in the early 2010s as a minor partner of Buccaneer Energy Ltd., which was then operating Cosmopolitan. BlueCrest eventually took over as sole owner and operator and brought the unit online in early 2016 from an existing well.
BlueCrest chose the onshore option. The company commissioned the custom-built BlueCrest Rig No. 1, which it billed as the most powerful drilling rig in Alaska. The rig was designed to drill 3 miles out and then a mile-and-a-half down to the reservoir and an additional mile-and-a-half horizontally through the sands, according to the company.
Even with a powerful rig, drilling from the shore was expensive and technically challenging. The multilateral campaign is a way to drill fewer directional surface wells.
"Each fishbone well contacts the same amount of reservoir rock as seven-(to)-nine individual horizontal wells, and each trident well should recover the same ultimate reserves as three fishbone wells since the reservoir contact is the same," then-CEO and President J. Benjamin Johnson told Petroleum News in 2019, adding, "so, each trident well provides the same amount of reservoir contact as 21-27 individual wells."
Work As part of its activities for 2022, BlueCrest overhauled the two gas compressors at the unit. The company described the compressors as "the lifeline of the facility." The compressors handle natural gas for sale as well as for injection at the facility to improve oil production and also provide fuel for operations. "This was a large undertaking but was critical work completed this year," the company wrote in its plan of development.
During the year, BlueCrest also completed upgrades to the mechanical refrigeration unit at Cosmopolitan. BlueCrest commissioned the unit in 2020. The unit can process up to 35 million feet per day of natural gas for sales. The facility is primarily designed to accommodate natural gas contained in oil production at Cosmopolitan, which is wet.
Also during the 2022 development year, BlueCrest performed hot oil treatments on its wells every three to four weeks to maintain production levels at Cosmopolitan. The company plans to perform similar treatments on the Hansen 1AL1, Hansen H4, Hansen H12, Hansen H14, and Hansen H16A wells in the coming year to maintain production.
Cosmopolitan produced 281,223 barrels of oil in 2022 and 130,853 in the first half of 2023, down from 331,077 barrels of oil in 2021 and 143,198 barrels during the first half of 2022, according to the AOGCC. The unit also produced 587 million cubic feet of natural gas in 2022 and 272 million cubic feet during the first half of 2023, down from 954 million cubic feet in 2021 and 313 million cubic feet in the first half of 2022.
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