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Explorers 2011: Anadarko returning to Gubik Complex After two seasons without drilling independent resumes search for gas in Brooks Range foothills Eric Lidji For Petroleum News
What a difference two years makes. When Anadarko Petroleum Corp. began exploring for natural gas in the foothills of the Brooks Range in 2008 many policymakers saw the Houston independent as a savior, but as the company returns to the region this winter it is overshadowed by other activity.
Anadarko drilled four exploration wells in 2008 and 2009 over a wide expanse of state, federal and Native lands and found natural gas at all four, but did not drill in 2010 and 2011. This winter, Anadarko plans to conduct further testing at one of those wells, but is not, as of yet, planning any additional drilling in what it calls the Gubik Complex.
While most independents come to Alaska in search of smaller fields overlooked by the majors, Anadarko arrived in the state in the early 1990s looking for a big “anchor.” Its goal remains essential the same: to determine whether the large but not massive gas fields in the foothills can be economically developed as a group. “The determining factor? If we can find three fields to make it that might work,” Anadarko official Mark Hanley told lawmakers in early 2009. “If it’s going to take us seven that might not be economic.”
Early partnerships remain Anadarko arrived in Alaska in the early 1990s, just after North Slope oil production peaked, looking to develop a large field that would make it a major player in the state.
The company began by partnering with the existing operators on the North Slope, offering its agility as an independent in return for experience in the Arctic.
The most successful of those partnerships remains in effect today.
Anadarko and Phillips Alaska (now ConocoPhillips Alaska) brought the Alpine field into production in 2000, and steadily brought three satellites online over the decade that followed, but plans for a fourth satellite are currently hampered by permitting delays.
Aside from a very small ownership interest in Pioneer Natural Resources’ Oooguruk unit, Alpine constitutes Anadarko’s entire production in Alaska, some 15,000 barrels per day, and the company spent $24 million on its operations in the state in the first half of 2011.
Over the past two decades, though, Anadarko also pursued other projects to varying levels of success. The Altamura No. 1 well in the National Petroleum Reserve-Alaska found oil, but also encountered low permeability. A well at the geologically unique Jacob’s Ladder prospect just southeast of the Prudhoe Bay unit found “no commercial hydrocarbons.” The Lone Creek No. 1 in Cook Inlet discovered commercial quantities of natural gas, but Anadarko ultimately sold its Cook Inlet assets in 2002.
Pioneering search for gas During that time, Anadarko gradually accumulated millions of acres across hundreds of miles of the foothills of the Brooks Range and in late 2007 the company announced plans to drill the first exploration wells in northern Alaska to specifically target natural gas.
In early 2008, it completed the Gubik No. 3 well and drilled halfway to target depth at the Chandler No. 1 well. Both wells sit on Arctic Slope Regional Corp. land east of the Colville River near Umiat, and both wells targeted gas, but from different formations.
In early 2009, Anadarko completed Chandler No. 1, and drilled the Gubik No. 4 well some two miles southeast of Gubik No. 3, and the Wolf Camp No. 1 well in the NPR-A.
Although Anadarko remains mostly mum about those wells, a former partner on the program said all encountered gas and one flowed at 15 million cubic feet per day, encouraging news but not enough information to determine the success of the venture.
This winter, Anadarko plans to return to conduct a “rigless test” at Chandler No. 1.
A different landscape With no major natural gas infrastructure in North Alaska, the initial campaign struck some as a vote of confidence for renewed efforts to build a natural gas pipeline from the North Slope to markets outside the state, including the Alaska Gasline Inducement Act.
And because Anadarko began that search so energetically, some policymakers believed the company could meet the energy needs of Alaska residents and businesses — replacing heating oil in the Interior and replacing declining production in Southcentral.
Alaska is a different place today than it was in 2009, though.
When Anadarko began drilling, two separate joint ventures had each announced plans to build a North Slope natural gas pipeline, but one of those players has since dropped out after failing to secure enough customers and the other is still in talks with potential shippers.
When Anadarko drilled its last exploration well in the foothills, Enstar Natural Gas Co. and the Alaska Natural Gas Development Authority had each proposed a pipeline from the North Slope to Southcentral to serve local markets, briefly joined forces at the request of the Palin administration and ultimately backed away from their plans after the Alaska Legislature formed the Alaska Gasline Development Corp. to manage the project, now known as the Alaska Stand Alone Pipeline, or (in an optimistic acronym) ASAP.
The Alaska Gasline Development Corp. believes an in-state pipeline could be economically feasible, despite its capacity restrictions and limited end-user demand.
Also over the past two years, one of the largest consumers of gas in Alaska, the liquefied natural gas export facility in Kenai, announced plans to go into warm shutdown. While that decision continues to be postponed, there is no indication that it will be reversed.
The energy marketplace also changed in the past two years.
In the United States, shale formations from Pennsylvania to Texas continue to drive up domestic natural gas supplies, creating uncertainty about whether Alaska natural gas will be needed anytime soon. In Asia, an earthquake and tsunami that damaged a nuclear reactor in Fukushima is increasing Japanese demand for liquefied natural gas imports.
Anadarko is now active in the natural gas liquids and oil rich Eagle Ford shale of South Texas and in the prolific northeast corridor of the Marcellus shale of Pennsylvania. The company also recently announced positive drilling results from Ghana and Mozambique.
Anadarko is also managing partner problems in Alaska and Outside.
Before launching its exploration campaign in the foothills, Anadarko brought on Petro-Canada and BG Group with much success, but in mid-2009 Suncor Energy acquired Petro-Canada and subsequently showed much less interest in Alaska than its predecessor.
Outside, Anadarko got caught up in the Deepwater Horizon oil spill as a partner of operator BP and a 25 percent owner in the Macando well that blew out in April 2010. In October 2011, Anadarko announced that it would pay BP $4 billion to settle all claims in the incident.
A different policy landscape Politically, Alaska is in different hands now, too.
After Anadarko completed its exploration work in early 2009, then-Gov. Sarah Palin ran for vice president and eventually resigned as governor, while her successor, then-Lt. Gov. Sean Parnell finished her term and eventually got elected to a full term of his own. While both Palin and Parnell believe the government can play a role in resource development, they took different approaches to crafting policies based on that shared philosophy.
While Palin pushed for major pipeline projects, Parnell is proposing a road to Umiat to improve the economics of Gubik and other nearby prospects. And while Palin increased the tax rate, Parnell now wants to give producers more of the upside when prices rise.
Those changes could be enough to keep Anadarko interested in Alaska, or the company could be gathering enough information to make its assets attractive to another interested party. Since it last drilled an exploration well in Alaska in early 2009, the company dropped more than 100 leases in the region, but it is unclear whether that is the first step out the door or merely an attempt to refine its portfolio before renewing its efforts.
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