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Winstar gets Kuparuk deal ConocoPhillips, other owners, agree to drill well on independent’s lease Kristen Nelson Petroleum News Editor-in-Chief
The paperwork is finally complete and Winstar Petroleum has the access it needs for drilling — and if that drilling is successful for production — at an oil and gas lease adjacent to the Kuparuk River field on Alaska's North Slope.
Meanwhile, the Alaska Department of Natural Resources is moving ahead with an application from Winstar to add the Winstar lease, which lies between the Kuparuk River and Milne Point units, to the Kuparuk unit.
The paperwork signed by the companies, a joinder agreement between Winstar and the Kuparuk River working interest owners, gives the Alaska-based independent access to Kuparuk facilities on the same basis as Kuparuk satellites, Winstar President Jim Weeks told Petroleum News April 16. The facilities are owned by the companies which developed the Kuparuk River field and unit operator ConocoPhillips Alaska will drill to the Winstar offshore lease from drill site 3-R on the northern edge of the Kuparuk unit.
All of the working interest owners at Kuparuk signed off on the joinder agreement, Weeks said. In addition to ConocoPhillips, they include BP Exploration (Alaska), Union Oil Company of California, ExxonMobil Alaska Production and ChevronTexaco. Access a long time coming It has been a long time coming. Weeks told the Resource Development Council's annual conference in November that of the leases Winstar holds on the North Slope, the lease at Kuparuk, at Oliktok Point offshore just north of the Kuparuk unit, “has the highest potential of generating cash flow …
“Based on 3-D seismic information we have, we believe there's a very high chance that the main Kuparuk River pool extends onto that lease,” Weeks said. “We also believe there's a fair chance there's a substantial quantity of oil on another fault block offsetting the main pool.”
Weeks said that Winstar, founded in 1996 by John Winther who teamed up with Dale Lindsey to buy leases at North Slope areawide sales in 1997 and 1998, has “lined up the investment capital necessary to test these beliefs by drilling and we hope to do that in the next year.”
A big advantage to that lease, he said, is that it can be drilled from Kuparuk drill site 3R, “about a mile and a half south of our intended drilling location (bottomhole).”
Charter, long-term negotiations Weeks told the RDC conference that what makes the Winstar project possible is the Charter for Development of the Alaskan North Slope, signed by the state, BP and ARCO on Dec. 2, 1999. When Phillips Petroleum acquired ARCO's Alaska assets, it also signed on to the charter.
The charter, Weeks said, “obligates ConocoPhillips and BP to furnish access to their facilities on — quote — reasonable terms. … If we didn't have that charter I don't think we'd be in negotiations today and things wouldn't be as optimistic looking as they are,” Weeks said.
North Slope drilling requires access to Alaska Clean Seas. “It costs half a million dollars to join,” Weeks said, and you have to have a $200 million net worth, which meant Winstar couldn't drill on its own.
Winstar has been talking to the Kuparuk operator about drilling for three years, Weeks said, and finally in August of 2002 Phillips (now ConocoPhillips) agreed to drill.
“I'm optimistic that this will all get done and we will get our well drilled by the end of next year,” he said in November.
One or more wells planned Weeks described the planned drilling in the January application to the state: one or more wells would be drilled “to prove reserve potential” on leaseADL388584. ConocoPhillips will drill on Winstar's behalf from an existing gravel pad, Kuparuk River unit drill site 3R. Winstar Oliktok Point State No. 1 “will be drilled north into the downthrown fault block,” with a planned depth of some 6,700 feet true vertical depth, “or to a depth sufficient to penetrate the base of the Kuparuk River formation,” Weeks said.
If the first well is successful, a second well would be drilled farther north “to further define reservoir extent.”
If the first well is unsuccessful, a sidetrack would be drilled to the upthrown fault block. The expected true vertical depth of this well would be 6,900 feet.
ConocoPhillips will use Doyon Rig No. 141, currently under contract to ConocoPhillips in the Kuparuk field. Winstar's plan of operations says drilling operations are planned to begin in mid-July. Drilling and completion are expected to take 13 days. Drilling operations, including a second well or a sidetrack, are expected to be complete by the end of August.
If a well to the Winstar lease finds commercial quantities of oil in the Kuparuk formation and in communication with the Kuparuk River reservoir, then Winstar can apply for an expansion of the Kuparuk participating area, the area within the unit from which oil and gas are produced. If there are commercial quantities, but not in the Kuparuk formation or not in communication with the Kuparuk reservoir within the unit, then Winstar can apply for formation of a separate participating area. Tract participation The joinder agreement allows for drilling a well on the Winstar tract and production from that tract if commercial quantities of oil and gas are found.
Winstar acquires no rights to the existing Kuparuk River unit properties — and the other owners acquire no rights to the Winstar lease.
If drilling is successful, Winstar will have access to Kuparuk River facilities on the same basis as Kuparuk River unit satellites and will have access to a minimum of five wellhead areas to Winstar.
Winstar is responsible for connecting its wells into drill site 3R facilities for transportation of its production.
The joinder agreement also says that drilling on this lease is a decision by Winstar: Winstar is responsible for its own review, analysis and interpretation of lease, geologic and geophysical data, and for oil and gas exploration, development and production operations and economic analysis.
And the agreement says the unit owners have a different view than Winstar: Winstar “acknowledges that its review, analysis and interpretation of its geologic and geophysical data have yielded an interpretation or result significantly different and substantially more optimistic than that of the Kuparuk owners,” the agreement says.
If Winstar is successful in finding commercial quantities of oil in Oliktok Point State No. 1, it will be the first Alaska-owned independent to produce oil on the North Slope.
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