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Bidders go after new prospects, gas-prone areas at state lease sale Alberta Energy, AVCG join Alaska's major oil and gas companies at state's third areawide North Slope oil and gas lease sale Kristen Nelson PNA News Editor
The Nov. 15 North Slope and Beaufort Sea areawide sales brought the state more than $11 million in high bonus bids, with few contested tracts as companies filled in around existing leases and staked major positions in unleased areas on the southeastern side of the onshore sale area.
Director of the Alaska Division of Oil and Gas Ken Boyd told PNA after the sale that he didn't think the dollars from the sale were the story. The story, he said, is that: “After you look at everything that's under lease already, or in production, to be able to take in another $11 million I think is pretty damned interesting.”
The state has been offering North Slope tracts for lease since 1965 and has held two previous North Slope areawide sales, providing access to all acreage not currently under lease.
One reason the sale brought in so much money, Boyd said, is that it wasn't quite like any other North Slope oil and gas lease sale the state has had.
“It's a traditional sale, in a way, in that companies were filling in holes in land they'd leased before… either buying some flank or the edge acreage or plugging a hole,” Boyd said.
The next thing would be the big block of continuous leases that Phillips and its bidding partners bought southwest of Point Thomson, “and that looks like a new prospect to me.” Both of those things, he said, would occur in a normal sale.
But the Anadarko-Alberta Energy (AEC Oil & Gas) bids are “a real change in the whole picture of leasing on the North Slope.
“They're out looking for gas on purpose. The acreage they are bidding on is clearly gas prone. I mean it's not oil country,” Boyd said.
Bidding by itself, Anadarko took five tracts south of the Kuparuk River unit. But bidding with AEC Oil & Gas, Anadarko took 27 tracts at the eastern edge of the sale area, 20 to 40 miles south of the Point Thomson unit, and another group of 14 tracts on the southern boundary of the sale area some 15 miles west of the boundary of the Arctic National Wildlife Refuge. Anadarko looking for gas Anadarko bid in three basic areas —one major area in the southeast corner of the sale —said Mark Hanley, Anadarko's Alaska public affairs manager.
“And that's a gas play,” he said.
Other companies “have tremendous gas reserves already, in Prudhoe Bay and Point Thomson,” he said. The combination of tracts Anadarko won in the lease sale and its ASRC lands, Hanley said, give it “a pretty dominant position in that gas play.”
He said the company will do seismic this winter in some of those areas and will drill in the 2001-2002 winter season.
Mike Richter, vice president of exploration and land for Phillips Alaska, said the large block of tracks Phillips won, most of it with the AEC-Chevron bidding group, is a new area for the company. “You look at that area, most of that has never been leased before.” The area is south and west of Point Thomson.
“We're hoping to shoot some seismic this winter,” he said.
Richter declined to discuss the geology of the area or what the company would be looking for.
Phillips and bidding partners AEC and Chevron took 32 tracts southeast of the Prudhoe Bay unit about halfway between the coast and the Umiat baseline, the southern boundary of this areawide sale. The largest block is 24 tracts to the west, with eight tracts more spread out to the east.
Bidding by itself, Phillips took two tracts southeast of Nuiqsut and five tracts near the southern boundary of the sale west of the trans-Alaska oil pipeline. Phillips also partnered with BP in acquiring four tracts south of the Kuparuk River unit. Independent bids $754,560 AEC Oil & Gas (USA) Inc., new to Alaska, formed a new venture agreement for exploration and development with Phillips and Chevron and purchased a one-third working interest in Anadarko's Arctic Slope Regional Corp. exploration area this summer. In addition to acreage bought at this sale, the company will earn interest in existing state oil and gas lease acreage through farm-out agreements with Phillips and Chevron. The company bid $2.5 million as part of two bidding groups and by itself. The three tracts AEC took on its own are adjacent to the Phillips-AEC-Chevron acreage on the south and east of the major block.
In addition to AEC the sale also brought in an independent from the Lower 48, AVCG LLC of Kansas, which bid on and won 11 tracts for $754,560, 7.25 percent of the sale's dollar volume.
Alfred James III, geological consultant to AVCG, said the company has two prospects, one in the big bend of the Colville River just east of the National Petroleum Reserve-Alaska and the other in the area south of Alpine and west of Tarn. The company took seven tracts at the bend of the Colville and four other tracts south of Alpine and east of the Colville bend tracts.
Bo Darrah, principal with AVCG, an acronym for Alaska Venture Capital Group, said these aren't the group's first leases in the state. “We bought James' leases. He had a couple and they were well positioned.”
James said he was surprised that AVCG picked up all the tracts it bid on. “We never dreamed that would happen,” he said. The state received 158 bids on 149 tracts in the North Slope areawide sale. Nine tracts had two bidders; none had more than two.
“It's amazing, things were spread out, there were very few contested tracts,” Darrah said. He said AVCG was contested by Phillips on one of the tracts it took south of Alpine - close to two tracts Phillips won. Bidding on conceptual fields “It's a major change for the industry in that what has been bid on and pretty much what's been drilled … up to the last few years, has been easily identified structures, anticlinal highs, just like Prudhoe Bay…,” James said.
“But what the industry is finding now, (fields like) Alpine and Tarn, are conceptual oil fields that are not easily identified.”
James said these type of fields exist in the mind of the geologist and “may or may not be there. But not as easily identified and no two geologists have quite the same ideas. … And I think that's why you see people bidding in their own individual areas and not too much overlap…”
AVCG does not plan to be an operator initially, James said, “because we don't feel we're knowledgeable enough in these areas,” but does intend to drill one or two wells as an interest owner a year from now.
Editor's Note: See sale map on page A17 and accompanying story beginning on page A15.
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