Providing coverage of Alaska and northern Canada's oil and gas industry
April 2020

Vol. 25, No.14 Week of April 05, 2020

Wanted: East Badami drilling partner

Glacier Oil files 17th annual plan for Badami; after successful exploration well looks to exploit untapped North Slope Killian reservoir

Kay Cashman

Petroleum News

Savant Alaska, a Glacier Oil and Gas company, filed its 17th plan of development for the Badami unit on March 22 with the Alaska Department of Natural Resources’ Division of Oil and Gas. Meanwhile, the Houston independent continues to look for a partner to invest $200 million in a three to four year drilling program in the previously untapped Killian oil discovery on its leases outside the Badami Sands participating area.

The discovery, made in early 2018, is in the East Mikkelsen prospect (renamed Starfish by Glacier) between Badami and the Point Thomson unit.

The discovery well, B1-07, was drilled directionally through the entire Canning formation and into the underlying Hue shale to evaluate the potential of the Killian sands. The Cretaceous Killian interval, which is a turbidite sandstone reservoir, is immediately above the oil source rock and below the Badami sands that form the main reservoir for the Badami oil field.

In early testing B1-07 produced 2,500 barrels per day, tapering off to 1,600 bpd by January 2019. Describing the Starfish prospect prior to drilling, a Glacier official said, “If this well works close to what we think it will, it should open five to seven more prospects similar to it.”

The Killian sands were previously encountered in the East Mikkelsen Bay No. 1 well drilled in 1971 by ExxonMobil predecessor Humble Oil & Refining Co. Using outdated technology, the vertical well hit oil in the Killian interval between 11,516 feet and 11,572 feet measured depth, with a tested flow rate of 700 barrels per day of 24 degree API oil.

Savant quickly brought the B1-07 well online in May 2018.

Production without, with Killian oil

Production from the eastern North Slope Badami unit averaged 879 bpd in November 2015 prior to Savant assuming operatorship in January 2016.

By January 2019, Badami was producing 2,323 bpd, with B1-07 accounting for 1,604 bpd.

The unit’s processing facilities can handle 38,500 bpd, a reminder of the ambitions of the original operator, BP Exploration (Alaska).

It came as no surprise when Glacier President Phil Elliott told Petroleum News in an April 2019 email that “The B1-07 well was an economic success and proved the prospective value of a Killian-focused drilling initiative,” noting the well was expected to “pay out in less than 15 months.”

Badami output averaged 1,357 bpd in February, down 3.8%, 53 bpd, from a January average of 1,410 bpd and down 25.6% from a February 2019 average of 1,823 bpd.

Badami problematic for BP

BP brought the Badami oil field into production in August 1998.

From nearly the beginning, the complex geology involving the compartmentalization of the oil reservoir into multiple, discrete sand bodies rendered the Badami unit challenging to produce. Oil output declined severely quite early in field life - BP suspended production on three occasions, with the second suspension lasting for two years. Field suspension allowed the reservoir pressure to recharge, as subsurface oil slowly migrated between the various sand units.

Oil production peaked a month after startup at some 7,450 bpd but soon began to drop, falling as low as 876 bpd by August 2007.

In mid-2008, BP took a different approach. The company gave Savant and ASRC Exploration, a subsidiary of Arctic Slope Regional Corp., a stake in Badami in return for returning the unit to operation. With Savant taking the lead with a 67.5% interest, it succeeded in bringing the unit to sustained production, albeit at low levels. (Later, ASRC sold small pieces of working interest to other companies, ending up with a 25% share by mid-2019.)

The partners acquired the field outright in early 2012, followed by the Badami pipeline system, which BP sold to Nutaaq Pipeline, a 67.5/32.5% partnership of Savant and ASRC in 2014.

One well at a time makes no sense

Under its 16th POD for the period July 16, 2019, through July 15, 2020, Glacier is doing what it said it was going to do except for deviating from one soft commitment: Although it continues to evaluate the results of B1-07 and will use the analysis to assess additional drilling locations, it is not drilling additional wells in the Badami unit this winter.

“It makes zero economic sense to drill one well at a time except to prove a concept (e.g., the Starfish/B1-07 well). To develop the Badami field in the most thoughtful way, we need to drill several wells over several drilling seasons, which results in a fairly significant capital outlay. Given the quantum required,” Glacier is seeking investors to help fund the drilling program, Elliott told PN in an Aug. 27 email, reconfirming the search for an inventor in a late March email.

And like Bill Armstrong, ConocoPhillips, Oil Search and other successful explorers on today’s North Slope, Glacier describes Starfish as one of “several new target pods of interest” identified through a geologic and geophysical review of the Badami and Killian sands.

Work planned in unit

The long-range components of the 17th POD period from July 16, 2020, through July 15, 2021, include the following:

* On March 15, 2013, the division issued a unit decision approving, in part, Savant’s request to expand the Badami unit, giving the company portions of two leases (about 2,204 acres) from ADL 391001 and ADL 390825 of the seven leases (approximately 10,121 acres) in the East Mikkelsen area between Badami and Point Thomson. Savant appealed this decision on April 4, 2013, and requested a stay of its plan of exploration under the decision on Aug. 16, 2013. Although Glacier has met with the Department of Natural Resources regarding the appeal and request for stay, the matter remains unresolved. The company wishes to continue to work with DNR to resolve the matter.

* As economic conditions warrant, Glacier intends to continue stimulating current Badami wells to enhance production and continue drilling as “economically appropriate” to fully develop the Badami Sands PA and the larger unit.

Exploration, delineation plans

Plans for the exploration or delineation of any land in the unit not included in the Badami Sands PA in the 17th POD include:

* Glacier will continue to evaluate B1-07 production and remaining reserves and apply this information to other Killian prospects within the unit.

* As economic conditions warrant, the company will drill additional prospects outside of the Badami Sands PA.

Operations for next 12 months

Proposed operations for at least one year following submission of the 17th POD on March 22 include the following:

* Continue permitting a new Badami drilling pad, the Badami East Pad (initially called the Dock Pad). Once construction is complete it would become the surface drilling pad for additional Killian prospect wells on the eastern side of the Badami unit.

* Continue well and facility maintenance and optimization and explore options to enhance production as appropriate.

* Conduct an engineering feasibility analysis related to infrastructure, tie-in and additional processing requirements for the new Badami East Pad

New road, pipeline and pad, 10 wells

Glacier’s 5-year permit from the U.S. Army Corps of Engineers for the development of a new Badami pad inland 1.3 miles from Mikkelsen Bay and some 34 miles east of Deadhorse, will accommodate the drilling of up to 10 new wells.

Issued in August, the permit said pad construction involves excavating a 9.2-acre gravel pit, building an 800-foot long, 36 feet wide, access road with culverts, and a 2.5-mile above ground pipeline on one or two (8-inch to 24-inch diameter each) VSMs connecting the new pad to existing field facilities.

The pad itself will be square, with 660-foot sides, and will be due east of the existing Badami pad.

The time limit for completing the authorized work ends on April 30, 2024, although the Corps is generally amenable to extensions.

In addition to Badami, Glacier operates three units in Alaska’s Cook Inlet basin - West McArthur River, Redoubt and North Fork.

Petroleum News - Phone: 1-907 522-9469
[email protected] --- https://www.petroleumnews.com ---

Copyright Petroleum Newspapers of Alaska, LLC (Petroleum News)(PNA)©1999-2019 All rights reserved. The content of this article and web site may not be copied, replaced, distributed, published, displayed or transferred in any form or by any means except with the prior written permission of Petroleum Newspapers of Alaska, LLC (Petroleum News)(PNA). Copyright infringement is a violation of federal law subject to criminal and civil penalties.