Providing coverage of Alaska and northern Canada's oil and gas industry
May 2018

Vol. 23, No.20 Week of May 20, 2018

State extends Great Bear leases in exchange for drilling commitments

Alan Bailey

Petroleum News

Having applied for and been granted three-year extensions to a number of North Slope leases that had been due to expire on April 30, Great Bear Petroleum has decided to focus its future efforts on two blocks of leases: one straddling the Dalton Highway south of Prudhoe Bay and one south of the Colville River unit, Pat Galvin, the companyís chief commercial officer and general counsel, told Petroleum News in a May 14 email. The company anticipates re-entering and testing its Alkaid No. 1 well, to the west of the Dalton Highway, drilling two new exploration wells by June 2019 and an additional exploration well by June 2020, Galvin said.

Applied for extensions

In October 2017 Great Bear applied to Alaskaís Division of Oil and Gas for three-year extensions to four blocks of leases, all of which had been issued in 2011 with seven-year terms - these leases had been due to expire on April 30 of this year. In March and early April the division agreed to extend all of the leases, which do not now expire until April 30, 2021. The lease extension approvals were based on drilling commitments by Great Bear. The company has also been operating quite a few other leases: Most of those leases were issued in 2011 and 2012 with 10-year terms, with expiry dates in 2021 and 2022.

However, while the division was reviewing the lease extension applications, Great Bear continued to evaluate the potential of the leases, using seismic data that the company had collected from annual surveys conducted from 2012 to 2016, Galvin said. As a consequence, the company has decided to drop the leases in two of the blocks that were granted extensions, now focusing its efforts on the two blocks that it has elected to keep. The company is also dropping some of its more remote acreage, he said.

Major lease fairway

Great Bear bought a major fairway of leases, straddling the Dalton Highway and mostly to the south of the Prudhoe Bay and Kuparuk River units in 2010 and 2011, with plans to investigate the potential for shale oil development in the North Slopeís prolific oil source rocks. The companyís program has since morphed into a search for both conventional and unconventional oil opportunities.

As part of its shale oil investigations, in 2012 the company drilled the Alcor No. 1 and Merak No. 1 wells to the east of the highway and proceeded with a program of rock and geologic evaluations. The company also conducted a multi-year program of 3-D seismic surveying in its acreage.

In 2015 the company completed the drilling of the Alkaid No. 1 well, targeting a conventional oil prospect on the west side of the Dalton Highway. Unfortunately, because of flooding on the highway towards the end of the 2015 exploration drilling season, Great Bear was unable to conduct any testing in the Alkaid well. In 2016 the company commented that it was waiting on tens of millions of dollars from the state in the form of outstanding tax credits.

Block near the highway

The first block of leases that have been extended and that Great Bear is going to keep consists of a group of 10 contiguous leases to the west of the Dalton Highway and another group of five leases straddling the highway. The group straddling the highway includes the Alcor, Merak and Alkaid wells. In its work commitment for this block, Great Bear plans to re-enter the Alkaid well to conduct testing. The company has also committed to drill two new exploration wells testing prospects in the block. Great Bear told the division that it had already expended more than $100 million in exploring this block, including the costs of drilling the three wells and conducting seismic surveys.

Under the terms of existing plans of operations, the re-entry of the Alkaid well and drilling of the first of the new exploration wells are to be carried out by May 30, 2019. The drilling of the second exploration well will require a new plan of operations and must be done by May 30, 2020. Flow testing of wells must be conducted in situations where well logging suggests the possibility of significant oil production. The approval document says that Great Bear has provided geological and engineering data in support of its drilling plans.

Nanushuk play?

The second block that Great Bear will continue to operate consists of four contiguous leases to the south of the Colville River unit and the village of Nuiqsut, some distance west of Great Bearís other leases. The four leases line up with the trend of recent oil discoveries to the north in the Nanushuk formation. The lease extension approval document says that the leases are underlain by Nanushuk sandstones, slightly younger than oil-bearing sands penetrated by the nearby Horseshoe No. 1 and Horseshoe No. 1A wells - seismic interpretation supports the possibility of both structural and stratigraphic traps in the acreage.

Great Bear has told the division that it had previously spent around $175,000 on an evaluation of seismic and other data relating to the leases. The lease extension approval document says that Great Bear anticipates spending at least $17 million on drilling a single exploration well in the lease block by May 30, 2019. The lease extensions require Great Bear to post a $6 million bond, which would be forfeited if the work commitment is not met.

Blocks being dropped

One of the blocks of leases that Great Bear has decided to drop consists of nine contiguous leases to the west of the Dalton Highway and another group of six leases to the east of the highway. According to the divisionís lease extension approval document Great Bear had demonstrated that it had previously spent more than $16.3 million on field work and data processing for these leases. Geological, geophysical and engineering data describe several oil prospects in the leases, the approval document says.

The second block of leases that Great Bear is dropping consists of 18 contiguous leases, to the west of the Dalton Highway, north and northwest of the leases that include the Alkaid well. Great Bear told the division that it had expended more than $11.3 million on the exploration of these leases, including expenditure on 3-D seismic surveys collected in 2013, 2014 and 2015. Work conducted added to an understanding of prospective targets in the leases, the divisionís approval document said.


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