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State sells record amount of acreage in Foothills lease sale First areawide sale south of producing fields brings in $10.7 million; attracts new players Petro-Canada, Burlington Resources to gas-prone area Kristen Nelson PNA Editor-in-Chief
Dollars, acres and bidders were all noteworthy when the state opened bids at its first ever North Slope Foothills areawide oil and gas lease sale in Anchorage May 9.
The state received 184 bids for 170 tracts, and with 978,560 acres receiving bids Division of Oil and Gas Director Mark Myers said this was the most acreage the state has ever sold in a single sale. The total of apparent high bids for the Foothills sale was $10,720,940.80. (see results map page A23)
Petro-Canada (Alaska) Inc., making its first bids in the state, took all the tracts on which it bid, and with 56 of 170 tracts walked away with apparently the largest amount of acreage.
Rob D’Adamo, Petro-Canada’s manager of land negotiations, told PNA after the sale that the company couldn’t say anything about its plans at this time, but was happy to be in Alaska. He said the 56 tracts the company bid on and won represented 322,560 acres. That is 33 percent of the 978,560 acres receiving bids. Petro-Canada paid $2,471,040, 23 percent of the high bids.
A 50-50 partnership of Anadarko Petroleum Corp. and AEC Oil & Gas (USA) Inc. (the U.S. subsidiary of Alberta Energy Co. Ltd.) took the second largest number of leases, 36 of 43 tracts on which they bid, for $2,191,654.80, 20.4 percent of the high bids.
They were closely followed by “5051 Alaska Inc.,” a legal entity set up by Burlington Resources to bid in this sale, which took 32 tracts of the 32 on which it bid for $1,992,163.60, 18.6 percent of dollars bid.
Union Oil Company of California took 18 tracts of the 18 on which it bid, but also spent $2,996,985.60, almost 28 percent of the high bids at the sale, and had the high per-acre bid at $147.74 an acre. Unocal Alaska spokeswoman Roxanne Sinz told PNA the company picked up 104,000 acres. “We’re excited by the results and look forward to pursuing opportunities that go along with it,” she said.
Chevron U.S.A. Inc. took 17 tracts of the 22 tracts on which it bid for $551,635.20, 5.2 percent of high bids, and a 50-50 partnership of Phillips and Chevron took nine tracts of the 11 on which the bid for $551,635.20, 4.2 percent of high bids. John Sutherland of Kansas took a single tract for $36,115.20 and R3 Exploration Corp. of Lakewood, Colo., took one tract for $31,590.40.
By company, for companies bidding in partnership, the individual dollars were: Anadarko and AEC, each $1,095,782.40, 10.2 percent; Chevron, $776,563.20, 7.24 percent; and Phillips Alaska, $224,928, 2.1 percent.
Foothills acreage gas prone Division of Oil and Gas Director Mark Myers told PNA after the sale that the acreage receiving bids is “all along basically the whole trend of the Brooks Range foothills. Most of it’s concentrated up here in the north where the potential’s better.”
The state considers the foothills to be a gas province. Oil is possible, but the last known oil is at Umiat, Myers said. Farther south the reservoir quality of the rocks makes oil fields less likely. “It’s possible for oil fields, it’s just not real likely.”
You don’t need the same quality reservoir for gas, because it’s easier for gas to move through the pore spaces in a reservoir, he said.
Wells drilled on state lands in the area “all had gas shows in them,” Myers said.
There are great structures in the sale area, and “if there’s sufficient volume there could be a lot of gas, because we know it was generated.” The source rocks are there and the generation window for gas is larger than for oil, Myers said.
“So the question was really, what will you see when you really start looking for it. We have the potential just to have a real world-class basin here.”
The bidding patterns, Myers said, “indicate that there are not a lot of specific small prospects targeted, that it’s over a broader area.”
There is only limited 3-D seismic in the area, and Myers said he suspects the companies have relied on data published by the Division of Oil and Gas, the Division of Geologic and Geophysical Surveys and the U.S. Geological Survey.
“I would fully expect, that given the bidding we had, to see an increased level of 3-D seismic, 2-D or 3-D seismic down there. I would expect people to do detailed analysis of the publicly available well data, to look at reservoir quality, reservoir potential, to follow up on that.
“They’ll map out the individual plays and then I would hope to see some drilling here in the next few years.”
Higher priced tracts to north The tracts drawing the 10 highest per-acre bids were all in the northern third of the acreage and only one of them was a contested bid.
Unocal had seven of the 10 highest per-acre bids and the 18 tracts it took are all in the northern third of the sale.
The most expensive block in the sale, all Unocal bids, is just a few miles from the northern border of the sale along the Itkillik River, south of Kuparuk.
Unocal bid $147.74 an acre, the highest per-acre bid in the sale, on tract 119; $68.42 an acre (the second highest bid) on the adjacent tract to the north and $27.36 an acre (the ninth highest bid) on the tract to the west of 119.
BP and Sinclair had gas shows in two drill stem tests in a 6,570-foot exploratory well drilled and tested in the spring and fall of 1964 just west of this block of three tracts.
Farther east, Unocal paid $42.12 an acre, the third highest per-acre bid, for a tract between the Toolik and Sagavanirktok rivers. Unocal took four tracts in this group, including the eighth highest per-acre bid, at $28.16 an acre.
Unocal’s most southerly block, seven tracks, included the fourth and fifth highest per-acre bids, at $39.09 and $38.16 an acre. This group of blocks straddles the Kuparuk River some nine miles south of the sale’s northern border.
To the east, Unocal took a row of four tracts between the Sagavanirktok and Ivishak rivers, including the most easterly tracts in the sale, and one of only two groups of tracts east of the trans-Alaska pipeline.
Anadarko/AEC other high bidder The other bidder with tracts in the top 10 per-acre group was Anadarko-AEC, which had the sixth and seventh highest per-acre bids, $29.12 and $28.76 an acre, for two of a block of 10 tracks between the Kuparuk and Toolik rivers beginning six miles south of the sale’s northern border. That group also had the 10th highest bid per acre at $24.38 for three tracts in a block of 11 adjacent to the highest-bid Unocal tracts on the east, and beginning at the sale’s northern border. The tracks are between the Itkillik and Kuparuk rivers.
Just to the east is a plugged and abandoned Newmont Oil Co.-Texaco Inc. well, the 1 East Kuparuk Unit, drilled to 7,000 feet in 1969. Traces of gas were recorded at this well.
Anadarko-AEC also took three tracts to the east on the northern edge of the sale area between the Sagavanirktok and Ivishak rivers, one of two groups of tracts east of the pipeline. In the southern third of the sale area, Anadarko-AEC took five tracks straddling the Anaktuvuk River and seven tracts farther south and east close to the Itkillik River.
Anadarko struck a 3 million acre exploration deal with Arctic Slope Regional Corp. on lands in the foothills in 1998 and AEC bought a one-third interest in that exploration venture in 2000. BP Exploration (Alaska) Inc. acquired a one-third interest this February. Anadarko said at that time that the joint exploration effort was already under way and included several seismic surveys this year. Anadarko is the operator.
Petro-Canada took most acreage Petro-Canada, which with 56 tracts was the most successful bidder, bid on areas in the southern half of the sale, and took both the farthest west and the farthest south tracts, with a block of seven tracts in the west and a block of 33 tracts reaching clear to the southern border of the sale.
The remaining 16 Petro-Canada tracts are adjacent to Chevron, Phillips-Chevron and Burlington Resources (5051 Alaska) tracts in the southern half of the sale area.
Burlington Resources took a block of 32 leases in the southern half of the sale between the Anaktuvuk and Itkillik rivers, east and north of the 17 tracts taken by Chevron bidding on its own and the nine tracts taken by Phillips-Chevron.
The tract taken by R3 Exploration is at Umiat, adjacent to a tract held by the company in the National Petroleum Reserve-Alaska.
The tract taken by John Sutherland is west of the Chandler River on the western side of the sale.
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