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THE EXPLORERS 2006 - Alaskan Crude forms North Slope unit
Petroleum News
A tiny independent oil and gas company received state approval to form an exploration unit adjacent to Prudhoe Bay on Alaska’s North Slope.
If that company — Alaskan Crude Corp. — meets the financial and work commitments set by the state in its four-year unit exploration plan it will be the first company of its size “to successfully operate on the North Slope,” the Division of Oil and Gas said in its June 29, 2006 findings and decision document on the 6,363-acre Arctic Fortitude unit.
According to the division, Alaskan Crude met its first commitment: Four days earlier than the due date of Aug. 16, 2006, the company paid a $60,000 fee to the state.
Even though the unit request involved lease extensions, approving it is “in the state’s interest because it would serve as an example for other similarly sized firms to follow, thereby promoting interest in further development of North Slope oil and gas reserves by companies of a similar size, of which there are many hundreds in North America,” the division said in its decision.
Money will be refunded One and a half miles southeast of the Deadhorse airport, Arctic Fortitude sits on the south side of the Prudhoe Bay unit within three state leases that were due to expire July 1, 2006. Unitizing the leases — ADL 389178, ADL 38179 and ADL 389177 — extended their expiration date as long as financial security and work commitments are met.
The initial plan of exploration for the new unit runs from June 30, 2006, to June 30, 2010. The plan has commitments that call for the workover and testing of the 1980s’ Burglin No. 33-1 well by Oct. 1, 2007; and drilling two new wells, one on each of the other leases, and shooting 3-D seismic over the entire unit by July 1, 2010. One of the new wells or the seismic program must be completed by Nov. 1, 2009.
Because Arctic Fortitude’s owners did not do any substantive exploration during the seven-year term of the three leases, the division required Alaskan Crude compensate the state for unrealized bonus payments.
The first payment was the $60,000 the company paid Aug. 11. Subsequent payments of $60,000 are also due in 2007 and 2008. The money can be recouped if the owners meet the unit work commitments over the four-year exploration period.
White and White The working interest owners of the three Arctic Fortitude leases are James W. White and James A. White. Unit operator Alaskan Crude is run by company President James “Jim” W. White of San Antonio, Texas.
The company, which the division describes as having a “long history of leasing and prospecting in the state,” also owns leases on Alaska’s Kenai Peninsula.
Former Division of Oil and Gas natural resource officer Bruce Webb is Alaskan Crude’s vice president of regulatory affairs. In the summer of 2006 he told Petroleum News that in the 1980s the company, under a different ownership structure, constructed three well pads on the three Arctic Fortitude leases.
In 1984-85 it drilled the Burglin No. 33-1 well in the Ivishak formation, the main reservoir formation in nearby Prudhoe Bay. After testing, the Burglin No. 33-1 well was suspended and all work was discontinued on the leases.
Alaskan Crude ran into difficulties in the early 1990s, Webb said, which was the reason the company didn’t do more drilling.
“In the late ‘80s and early ‘90s when the market and everything crashed they ended up going bankrupt,” he said.
Jim White bought the bankrupt company and repurchased the three leases in a state lease sale.
In its re-entry of the Burglin well in the winter of 2006-07 Alaskan Crude plans to test several intervals including the West Sak/Ugnu, the middle Cretaceous Brookian and a portion of the Ivishak formation. Webb said the well is downdip from the Prudhoe Bay field. There is a significant geologic fault between the Arctic Fortitude unit and the adjacent NE Storms unit, he said.
The Burglin well penetrated the Ivishak, which appeared to be a little wet, Webb said. But there are questions regarding the testing done in the Ivishak, he said.
“There is talk that the well tests were inconclusive because the formation lost a lot of drilling fluid and, when they flowed the well, what they got back was the drilling fluid they lost and they didn’t flow the well any further,” Webb said. “… They didn’t even flow it long enough to get formation water, so we think that there’s a possibility that we can go back in and perforate it in different zones.”
And, he said, there is also oil potential in multiple horizons above the Ivishak.
“If you go up higher in the interval, into the Kuparuk sand, the West Sak, the Ugnu, there are oil shows in all of those,” Webb said. “The geologist that is working with Alaskan Crude terms it relic oil — oil that was from when the Prudhoe Bay accumulation was much larger. When it migrated, some of the oil was left.”
And the original drillers bypassed a heavy oil accumulation in good reservoir sands in the West Sak, he said.
“They weren’t going for the smaller accumulations of heavy oil,” Webb said.
Oil at $70 per barrel makes that type of accumulation economic, he said, noting that Jim White has experience in developing heavy oil in West Texas, using specialized production methods.
The well also has potential for gas production, Webb said.
“We believe they encountered gas around the Kuparuk and Saddlerochit,” he said.
If Alaskan Crude finds an economic accumulation of oil or gas, connecting to the existing North Slope infrastructure should prove straightforward. The trans-Alaska pipeline passes through the middle of the unit and the Haul Road is just four miles to the east, Webb said.
Editor’s note: Bruce Webb has since gone to work for Aurora Gas, but has a part-time contract with Alaskan Crude.
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