State terminates North Slope Qugruk unit

ERIC LIDJI

For Petroleum News

The state terminated the Qugruk unit earlier this year. In a late January ruling posted online earlier in March, state Department of Natural Resources Commissioner Andrew T. Mack announced that the North Slope unit had automatically terminated on Jan. 27, 2017, five years after the unit was approved.

Repsol E&P USA Inc. requested a 98,852-acre Qugruk unit over 49 leases in the Colville River Delta region in late 2011. Along with partners 70 & 148 LLC and GMT Exploration Co. LLC, Repsol proposed a four-well exploration program for the unit.

An oil and natural gas unit in Alaska generally terminates five years after initial approval unless the company shifts into development mode or the state approves an extension.

In early 2012, the state approved a 12,065-acre unit over six leases and required Repsol to post a $20 million bond to backstop the initial well in the program by the end of June 2012. In addition to the bond and the work commitment, the state also increased the rental rate of four leases that would have expired without the protection of the unit.

With the termination, seven leases associated with the unit reached the end of their primary terms and entered their secondary terms, which will expire on May 4.

After drilling the required well, Repsol asked the state to extend the primary terms of five un-unitized leases in the Qugruk area by three or four years. The request followed a newly passed legal provision allowing the state to make such extensions. The state ultimately gave Repsol an additional two years on the leases, but required the company to drill an additional well, post a $100,000 bond and collect new seismic information.

Following the initial Qugruk program, Repsol and its partners shifted their focus to other sections of their large leasehold between the Kuparuk River unit and Colville River unit and have since made two announcements of a major discovery across that broad region.

In early 2015, Repsol asked the state to form the 63,304-acre Pikka unit over 33 leases covering a portion of the acreage that the state had excluded from the Qugruk unit. The state approved the unit in June 2015. After reorganizing, Armstrong Energy LLC is now operating the program. The current development plan involves Pikka, not Qugruk. But many of the wells in the Pikka program continued to use the Qugruk naming system.

—A copyrighted oil and gas lease map from Mapmakers Alaska was a research tool used in preparing this story.