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Explorers 2011: BRPC shifting to development mode Most active explorer of recent years is eyeing several potential developments across North Slope Eric Lidji For Petroleum News
The Alaska Venture Capital Group, or AVCG, one of the most active explorers on the North Slope, is looking to become one of the most active developers on the North Slope.
Through its operating subsidiary Brooks Range Petroleum Corp., or BRPC, the Kansas-based independent operates one unit and, with its joint venture partners, is in the process of forming three more units across the central North Slope. The company also holds acreage prospective for shale source rock exploitation.
Whether or not the joint venture will ultimately develop all those prospects depends on the usual factors — ranging from geology, to commodity prices, to financing — but AVCG is close to proving what it set out to prove when it arrived in Alaska more than a decade ago: that a small exploration outfit can become a producer on the North Slope.
In the pursuit of fields between 25 million and 50 million barrels, the joint venture has drilled five wells and several sidetracks, and leases more than 330,000 acres in Alaska.
The joint venture includes Brooks Range Development Corp., Calgary-based independent TG World Energy Corp. and Nabors subsidiary Ramshorn Investments Inc.
Followed Charter to Alaska Formed in 1999 by long-time oilmen John Jay “Bo” Darrah Jr. and Barton Armfield, AVCG emerged as big mergers and acquisitions were changing the Alaska oil industry.
Concerns about anti-trust violations led to the Charter for the Development of the North Slope, an agreement between the State, BP Exploration (Alaska) Inc. and ARCO, guiding how those companies would divvy their assets and treat potential third party operators. Within that environment, AVCG and other independents arrived to seek out oil fields too small to interest the majors, but potentially profitable if developed correctly. The company acquired several prospect, but struggled early on to find partners to help fund exploration and to negotiate access agreements from the North Slope operators.
AVCG formed Brooks Range Petroleum in 2004 to be an operating arm for the company, and over the course of 2006 the subsidiary became the operator of a four-company joint venture with TG World, Ramshorn and Calgary-independent Bow Valley Energy Ltd. (The British independent Dana Petroleum eventually bought Bow Valley and ultimately chose to sell its Alaska assets back to the joint venture.)
Exploration in Gwydyr Bay Those companies set off on a multiyear exploration program. In early 2007, Brooks Range Petroleum spud North Shore No. 1 and Sak River No. 1, both in the Gwydyr Bay region. While Sak River No. 1 turned out to be a dry hole, North Shore No. 1 found “approximately 70 feet of oil-charged Ivishak sandstone formation.”
In early 2008, the companies re-entered North Shore No. 1 to test both the Ivishak and the shallower Sag River formations and drilled the Tofkat No. 1 well east of Nuiqsut.
North Shore No. 1 flowed at 2,092 barrels per day of oil from the Ivishak formation, but a mechanical problem down hole compromised the Sag River test. One partner estimated the formation could have flowed as much as 1,000 barrels per day, if unencumbered.
At Tofkat No. 1, the companies took 10 oil samples from four different sandstone reservoirs and found six feet of net pay in the Kuparuk formation, the deepest zone tested. The joint venture also drilled two sidetracks to find the edge of the Tofkat reservoir, and acquired 210 square miles of 3-D seismic over the prospect.
A lawsuit between two partners in the program prevented the joint venture from drilling in the winter of 2009, but the companies resolved the matter in time to drill two wells in Gwydyr Bay in early 2010. The results of the Sak River 1-A sidetrack led partner TG World Energy to relinquish some of its interest in the exploration program. The remaining companies drilled North Shore No. 3, but have not yet released results.
In early 2011, all three remaining partners drilled the North Tarn No. 1 well, farming-in six Eni Petroleum leases along the western edge of the Kuparuk River unit. That well proved to be the only North Slope exploration well drilled in the winter of 2011.
Drilling at Beechey Point Now, the joint venture is using the information it gathered from the years of drilling to outline development opportunities at its four units, one actual and three in the works.
In 2009, the companies formed the Beechey Point unit in the Gwydyr Bay region. The 52,879-acre unit covers 30 onshore and offshore leases long known to overlie several oil deposits considered small, but only by the outsized standards on the North Slope.
Brooks Range Petroleum said it expected to recover between 5 million and 10 million barrels from the reservoirs. The unit is currently divided into five exploration blocks and Brooks Range is required to drill a well in each block between 2011 and 2019.
The Beechey Point development plan is based on 15 previous wells drilled in the region, starting with Point Storkersen No. 1, drilled in April 1969 by Hamilton Brothers, and the efforts of the AVCG joint venture.
Brooks Range Petroleum said in filings that despite “respectable” results from previous wells in the area, “a cost structure founded on drillsites capable of producing 100,000 bopd was not suitable for ‘marginal’ areas, particularly with commodity prices in the $20 to $30 price range,” and, “as a consequence, these accumulations lay dormant for many years.”
BP Exploration, ARCO Alaska and Exxon formed a partnership in 1995 to explore the area and BP drilled the Pete’s Wicked No. 1 well to the south of the proposed Beechey Point unit in 1997, but even though BP and ARCO subsequently permitted a development plan around Pete’s Wicked, the companies canceled the effort after a drop in oil prices.
Pioneer Natural Resources Alaska picked up Pete’s Wicked in 2003 and began permitting a development plan in 2004, but soon suspended the project. Pioneer eventually sold three leases around Pete’s Wicked to the joint venture led by BRPC.
The joint venture began its work at Beechey Point on the west side of the Kuparuk delta and soon plans to explore several known oil accumulations on the east side of the delta, Winegarner, vice president of land and external affairs for BRPC, said in January 2010.
Three units in the works Over the course of 2011, Brooks Range Petroleum applied to form three more units.
The proposed Putu unit would cover 39,994 acres over 28 leases — 11 owned by the State of Alaska and 17 owned jointly by the state and Arctic Slope Regional Corp., the Alaska Native corporation for the North Slope — in the area around the Tofkat prospect (previously known as the Titania prospect when ConocoPhillips held leases in the area).
In filings, Brooks Range Petroleum said the working interest owners of the leases in the area had spent nearly $25 million to date on exploration. The company presented a plan for drilling up to six wells at three exploration blocks over two five-year terms, one running through March 31, 2016, and a possible extension through March 31, 2021.
That plan could yield production as soon as 2015, Brooks Range Petroleum said.
The proposed Southern Miluveach unit would cover 60,684 acres over 29 State of Alaska leases around the North Tarn No. 1 well, including six leases owned jointly by Arctic Slope Regional Corp. Brooks Range Petroleum said the working interest owners spent about $15 million in the region and now plan to explore and develop the region simultaneously. The Mustang development plan calls for beginning production as soon as 2014, while also drilling a well in each of six exploration blocks through 2020.
North Tarn No. 1 counts as the first of those proposed drilling commitments. Brooks Range Petroleum told Petroleum News it plans to complete and test the well this coming winter, as well as drill as many as two delineation wells based on the testing results.
The development plan is based on 18 previous wells drilled in the region between 1966 and 2010 — to depths between about 6,400 feet and 13,000 feet — but aside from five wells drilled at Kuparuk, all have been dry holes. That includes the Ataruq No. 2 and Ataruq No. 2A dry holes that Kerr-McGee drilled in the proposed unit area in 2005.
Both Brookian and Kuparuk Brooks Range Petroleum believes the region contains reservoirs in both the Brookian and the Kuparuk formations. The shallower Brookian is believed to hold some 35 million barrels of oil, but the complex geology in the region would make getting that oil quite difficult. The deeper Kuparuk is thought to contain only 6 million barrels, but Winegarner said that would be enough to support standalone production facilities.
Although Southern Miluveach is near the proposed Putu unit, Winegarner said it didn’t make sense to develop the prospects jointly because of distance and regional geography.
Finally, the proposed Greater Bullen unit would cover 200,058 acres over 68 State of Alaska leases in the area south of the Point Thomson unit on the eastern North Slope.
Among the prospects in the AVCG portfolio, the Greater Bullen area — also known as Slugger or South Thomson — is one of the least explored, but it plays a strategic role for the company because of the promise of regional development on the eastern North Slope.
The Telemark development could yield production from the area west of the Arctic National Wildlife Refuge as soon as 2015, while Brooks Range Petroleum simultaneously works to drill a well in each of six proposed exploration blocks and shoot 300 square miles of 3-D seismic by March 31, 2012, to justify future development.
The working interest owners have spent only $4 million to date exploring the region, but previous exploration work in the area identified the Friezen and Red Dog prospects.
Friezen was the main prospect in the former 79,508-acre Slugger unit that BP formed over 14 leases in the region before it ended its Alaska exploration program in 2001. BP estimated that Slugger contained some 280 million barrels of oil, but never publically estimated the recoverable reserves for the unit. Depending on the source, Red Dog is estimated to contain between 45 million and 85 million (P-50) barrels of recoverable oil.
Considering source rocks Concurrent with those conventional efforts, AVCG is also looking for partners to help develop the source rocks believed to be present beneath 100,000 acres of its holdings.
The company began scouting for potential partners at the North American Petroleum Expo in Houston this past March and said it met with 75 companies. Of those, six asked for more information and have been continuing discussions in the months since.
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