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State denies Placer expansion request ASRC wants to increase size of western North Slope unit to original application size of four leases, defer drilling by a year Kay Cashman Petroleum News
ASRC Exploration’s application to expand the western North Slope Placer unit to nearly 8,800 acres and defer its drilling obligation by one year has been denied by the state of Alaska.
Bill Barron, director of the Alaska Department of Natural Resources, Division of Oil and Gas, said in a Jan. 14 decision that “expansion of the unit is unnecessary to accomplish the activities” ASRC Exploration set out in its application. He said the public interest is not served by granting a “six fold expansion of the unit before AELLC (ASRC Exploration LLC) has met the major initial work commitment upon which the Placer Unit approval was based.”
Barron said the application to form the unit, which sits on the western edge of the ConocoPhillips-operated Kuparuk River unit, included “a firm exploration commitment” to re-enter the Placer No. 1 well drilled by ConocoPhillips or to drill a new well by June 30, 2013, to determine “whether sufficient volume of producible hydrocarbons exists in the unit area to warrant commercial development.”
That application was submitted in January 2011, and was for 8,769 acres on four state leases — the state accepted ASRC Exploration’s work commitment but pared the unit size down to 1,480 acres.
At nearly 8,800 acres, the Placer unit would still be one of the smallest units on Alaska’s North Slope, second only to UltraStar’s Dewline unit.
Previous work ARCO Alaska shot a 3-D seismic survey covering the Placer area in 1997 and ConocoPhillips and partners, with ASRC Exploration farming in for a 35 percent working interest in the project, drilled the Placer No. 1 and No. 2 wells in 2004.
Placer No. 1 found “an oil-bearing reservoir in the thin Kuparuk C sand.” Barron said no production test was performed but the well was suspended to preserve the ability to test at a later date.
After drilling the second well the partnership decided that the reservoir discovered in the Placer No. 1 was “not economic to develop and the leases were subsequently dropped.”
In the state’s 2006 oil and gas lease sale ASRC Exploration re-acquired the leases, which had a five-year primary term, and by the time it applied to form the unit in early 2011 it had acquired ownership of the Placer No. 1 wellbore and was in the process of acquiring a license to 3-D seismic that had been shot over the area.
That 2011 application included a commitment to reprocess and reinterpret the 3-D seismic and drill and log a new exploratory well or re-enter and test the Placer No. 1 well by June 30, 2013.
The application was approved in September 2011, but only for a portion of the total leases.
In August 2012 ASRC Exploration applied to expand the unit and extend the drilling obligation to June 30, 2014.
BRPC connection In its August expansion application ASRC Exploration said interpretation of data “indicates that the Kuparuk sand at Placer extends well beyond the current unit boundaries.”
The company also said the Placer sand “is, at best, only marginally large enough to develop,” and said the “sand appears to merge with the BRPC (Brooks Range Petroleum Corp.) Appaloosa prospect to the south,” and that it “may be prudent to involve BRPC in any unit expansion discussions and in the locating of the delineation well so that the area from Placer to Mustang can be developed in an optimal manner in order to maximize the economic recovery of these thin sands.”
Barron said that while ASRC Exploration submitted modeling results from seismic, “No conclusive data has been presented that the oil-bearing Kuparuk sands extend into the expansion area.”
He also said that while ASRC Exploration argues that the expansion would allow it to join with BRPC in developing the unit, the expansion area and BRPC’s Mustang project to the south, “there is no proposal to expand the unit to include BRPC or its properties in the unit. There is no indication that BRPC has any desire to join AELLC in the Placer unit.”
Barron said the application contains no proposal for work beyond the work which was the basis for the original unit approval.
“Neither denial of the proposed unit expansion or drilling extension precludes AELLC from drilling exploration wells in the unit and the expansion areas to obtain data to support a development proposal that would implement efficient recovery of oil and gas resources,” he said.
Barron said while an extension of the drilling deadline and a unit expansion, which in his decision was pegged at 8,768 acres, would protect ASRC Exploration’s interests, it “would not protect the state’s interest because it would delay development.”
ASRC Exploration has 20 days to file an appeal with the state.
Should the subsidiary of Native corporation Arctic Slope Regional Corp. elect to move forward with development of Placer, it will make it the sixth operator of oil production on the North Slope, behind BP, ConocoPhillips, and relative newcomers Pioneer Natural Resources, Eni Petroleum and Savant.
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