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THE INDEPENDENTS 2003: Winstar looks to explore eastern prospects Company waiting on seismic analysis for Liberty, Badami leases, then will look for partner Kay Cashman Petroleum News
Anchorage-based Winstar Petroleum took a major step in June when it spud the Oliktok Point State No. 1 well adjacent to the northern boundary of the Kuparuk River unit on Alaska’s North Slope.
Winstar, which was established in 1997 by Petersburg fisherman John Winther and Seward businessman Dale Lindsey, hoped to become the first Alaskan-owned independent producer on the North Slope.
And the company still might earn that designation. Although the Oliktok Point well turned out to be a duster, Winstar President and CEO Jim Weeks was optimistic about his company’s future exploration plans.
“We were all excited about the prospect of becoming the first Alaskan owned and based independent to produce oil from the North Slope, but we must now wait for another occasion to celebrate,” Weeks said in July.
Focusing on Liberty, Badami Winstar and its sister company, UltraStar Exploration, have more than 20, 000 acres of state leases on the North Slope, including an override on a 2,000 acre lease that is part of the Pioneer Natural Resources-operated Oooguruk unit.
Winstar is focusing its attention on its eastern leases in the Liberty and Badami areas, Weeks told Petroleum News in July and confirmed in October.
“We have two sets of leases between BP’s Liberty prospect and BP’s Badami unit (currently in a warm shut-down mode). We think we have two to three prospects between the two groups of leases,” he said.
In 2002 Winstar acquired 53 square miles of 3-D seismic from BP Exploration (Alaska). The data covered a substantial portion of Winstar’s Liberty and Badami area leases. Winstar hired a subsidiary of Chroma Energy of Sugar Land, Texas, to “evaluate the seismic and work up prospects,” Weeks said.
Chroma’s analysis should be complete before the end of 2003: “Hopefully, there will be prospects that are big enough to justify the expense of drilling. They’ll require deeper drilling,” Weeks said.
The two Liberty leases are offshore in Foggy Island Bay southwest of the Liberty prospect but can be drilled from several spots along the coast, he said, including the Mikkelsen Bay exploration well drilled by Mobil in 1969.
Not same geology as Badami The six contiguous Badami leases are onshore — west and southwest of BP’s Badami unit (see map on pages 50 and 51). “It’s a different geological setting than the Badami reservoir. We’re on the shelf so depositional environment should be different. That’s what we think Chroma’s analysis will show,” Weeks said. He also hopes the analysis will show “quality-size prospects” because the cost of drilling wells on Winstar’s Liberty and Badami-area leases will be “substantial.”
If Chroma says Winstar has drillable prospects, Weeks will begin looking for partners to drill and fund the exploration.
No unexpected costs Potential investors can be assured of two things: Weeks' extensive North Slope experience as a senior executive with ARCO Alaska and the fact that Winstar expected to spend $6 million on seismic acquisition and drilling the Oliktok Point well and it did.
The well, which was drilled onshore from Kuparuk unit drill site 3-R to an offshore target, was “a huge disappointment,” Weeks said, but, “We paid the price we wanted to pay. At least it didn’t cost us three times what we had planned to spend.”
Winstar’s efforts to get an Oliktok Point well drilled represented the first complete test of a 1999 agreement with the state of Alaska which obligates two (ConocoPhillips and BP) of the three major facility and pipeline owners on the North Slope to provide reasonable access to its infrastructure for non-owners.
Weeks didn’t just negotiate an exploration agreement with ConocoPhillips and its partners at the Kuparuk unit. He negotiated a deal all the way through discovery and production, so that Winstar could be assured of reasonable terms if it discovered oil.
Separately, Weeks contracted with ConocoPhillips to operate the Oliktok Point well because Winstar was not large enough to handle some of the environmental costs due to the drill site’s proximity to the coast, such as mandatory membership in a local spill response group. Alaska Clean Seas, the only spill response group in the Arctic at the time, charged $500,000 to join, plus an annual membership fee. ConocoPhillips was already a member of that group, and a member of its executive board.
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