Arc of plenty

With discoveries in adjacent units, Armstrong applies for Tuvaaq unit

Kristen Nelson

Petroleum News Editor-in-Chief

It may not be the National Petroleum Reserve-Alaska or the Arctic National Wildlife Refuge, but it is currently the hottest little exploration trend on Alaska’s North Slope.

Over the last several years Denver-based Armstrong Oil and Gas has assembled 46,000 acres of state oil and gas leases in the shallow waters of Harrison Bay, arcing across the top of the Kuparuk River and Milne Point units.

Armstrong brought in two large independents, Pioneer Natural Resources and Kerr-McGee Oil and Gas, as majority partners and operators of exploration units on either end of the acreage.

Armstrong first brought in Pioneer at Oooguruk, the unit on the most westerly of the acreage. The companies drilled three wells in the winter of 2002-03 and announced an oil discovery. Armstrong then brought in Kerr-McGee as operator of the Nikaitchuq unit on the eastern side of the arc. Kerr-McGee and Armstrong drilled two wells last winter, and also announced an oil discovery.

The Alaska Department of Natural Resources Division of Oil and Gas approved the exploration unit at Oooguruk (Pioneer 70 percent, Armstrong 30 percent) last July and the exploration unit at Nikaitchuq (Kerr-McGee 70 percent, Armstrong 30 percent) at the end of April (see story on Nikaitchuq in this issue).

Armstrong has now applied for the Tuvaaq exploration unit on 14,560 acres between Oooguruk and Nikaitchuq, and in the application said it will be the operator at this third unit.

“We are not currently looking for partners,” Ed Kerr, Armstrong’s vice president of land and business development, told Petroleum News June 9.

Armstrong has acquired five leases at Tuvaaq from ConocoPhillips Alaska, and is in the process of acquiring the last two, also held by ConocoPhillips, so it will have 100 percent working interest ownership. ConocoPhillips holds a 4.25 percent overriding royalty on the five leases assigned to Armstrong. All of the leases have a 16.66667 percent state royalty and expire at the end of the year.

The seven leases, 14,561 acres, proposed for the Tuvaaq unit are immediately northeast of the Oooguruk unit, north of the Kuparuk River unit and southwest of the Nikaitchuq unit.

Armstrong has proposed a five-year exploration plan, with the first well, Tuvaaq No. 1, to be drilled this winter to test Triassic/Jurassic. A second well is proposed in 2006-7 to test Cretaceous/Jurassic and a third well in 2008-9 to test Triassic/Jurassic.

Armstrong told the state that prospective intervals to be tested in the exploration program “may include but are not limited to the Cretaceous Kuparuk sandstone, the Jurassic Nuiqsut sandstone, the Triassic Sag River sandstone, the Triassic Eileen sandstone and Triassic Ivishak sandstone.”

Historic drilling in area

In 1992 ARCO Alaska (now ConocoPhillips Alaska) drilled the Kalubik No. 1 which tested Kuparuk C sands at a rate of 1,220 barrels per day (25.5 degree API gravity oil) and Jurassic Nuiqsut and Nechelik sandstone (19.7 degree API gravity oil) — on nitrogen lift — at an average rate of 660 bpd.

In 1993 Exxon drilled the Thetis Island No. 1. That well had minor shows of hydrocarbon in Sag River sandstone and an additional pay zone in the Nuiqsut interval, which tested at rates as high as 650 bpd and had an average rate over the test of 120 bpd.

Both wells, Armstrong said, “encountered prospective sandstones with significant hydrocarbon shows in the Cretaceous Brookian section.”

Pioneer and Kerr-McGee wells

In 2003, Pioneer and Armstrong drilled three wildcats, the Ivik, the Natchiq and the Oooguruk, “directly to the southwest of the Tuvaaq unit, within the Oooguruk unit,” Armstrong said in its application.

The Ivik “penetrated reservoir-quality sands within the Brookian and Jurassic intervals,” Armstrong said. While the there were “impressive mud log hydrocarbon shows” in the Brookian, it yielded water on formation test. The Nuiqsut sandstone, an interval of more than 60 feet, had an initial potential rate of 1,300 barrels of oil per day after fracture stimulation. Armstrong said the Oooguruk was an offset well to the Ivik, and encountered more than 45 feet of sandstone pay in the Nuiqsut. The Oooguruk was not production tested, “but yielded hydrocarbons on wireline formation test.” The Oooguruk also encountered 10 feet of porous Kuparuk C sandstone which was productive on wireline formation test, Armstrong said.

The Nikaitchuq No. 1 and No. 2 wells, drilled by Kerr-McGee and Armstrong last winter, “were drilled to the Triassic Ivishak sandstones” and the No. 1 “encountered productive Triassic Sag River sandstone” and was tested at a stabilized rate of 960 bpd of light 38 degree API gravity oil. That well also encountered Eileen/Ivishak sands with “significant hydrocarbon mud log shows.”

Armstrong said the No. 2 well “successfully extended the known limits of the Sag River accumulation. … Engineering modeling work on the Sag River sand suggests the well could produce at rates as high as 2,500 bopd if drilled and completed laterally.”

Drilling prospects

The company said the seismic data, in conjunction with recent exploration and development drilling, “established an overall prospective trend for Ivishak sand and a trend of improving Sag River/Eileen sand quality and thickness to the north/northwest over the West Milne structures and within our proposed Tuvaaq exploration unit.”

Armstrong said the Jurassic Nuiqsut sandstone, a “secondary interval of prospective interest,” is expected to have a “separate hydrocarbon system than previous penetrations to the southwest” and “hydrocarbon limits should be controlled by the stratigraphic sand limits within the Tuvaaq unit area” not by structural elevation.

“Sand presence, good reservoir quality and hydrocarbons tests within the Kuparuk interval in the Oooguruk and Kalubik wells directly to the southwest highlight” the Cretaceous Kuparuk sandstone as the third prospective interval at Tuvaaq, Armstrong told the state. The company said pressures collected at the Oooguruk well “define a separate hydrocarbon accumulation than the Kuparuk field” and it believes “that this sand is stratigraphically separated from the Kuparuk field accumulation and more similar to the structural hydrocarbon levels observed in the Mukluk and Phoenix Cretaceous Kuparuk intervals.”

Drilling program

Armstrong said that based on results from the first well, “geologic studies, engineering studies and seismic reprocessing are planned in 2006 leading to a second exploration well for the 2007 winter drilling season, or earlier.”

The proposed second well would have a TVD of 9,600 feet, a surface in section 19-T14N-R8E, UM, and a proposed bottom hole in section 8-T14N-R8E, UM, would “test the prospectivity of the Cretaceous Kuparuk sand interval, Jurassic Nuiqsut sand continuity and limits of the Triassic Sag/Eileen/Ivishak accumulations” in the unit.

The third well, planned for the winter of 2009, or earlier, would “test the prospectivity of the Triassic Sag/Eileen/Ivishak intervals on the eastern structure,” with a proposed surface in section 25-T14N-R8E, UM (the same proposed for the first well), a proposed bottom hole in section 11-T14N-R8E, UM, and a proposed TVD of 9,600 feet.

Alaska okays Kerr-McGee’s Nikaitchuq unit

Kristen Nelson

Petroleum News editor-in-chief

Nikaitchuq is the most easterly of the three Harrison Bay exploration units assembled by Armstrong. It is in the near-shore waters of the Beaufort Sea, north of Oliktok Point at Spy Island, and north of the Kuparuk River and Milne Point units.

The Nikaitchuq No. 1, drilled by Nikaitchuq-operator Kerr-McGee this last winter season, tested 38 degree API crude oil at more than 960 barrels per day, the company said in April. The Nikaitchuq No. 2, drilled 9,000 feet southwest of the No. 1 well, “successfully extended the accumulation down dip,” Kerr-McGee said.

There are eight state leases in the unit, five of which date from Beaufort Sea Sale 86, held in November 1997, with expiration dates of Dec. 31 this year. The state has a 16.66667 percent royalty in all of the leases. Kerr-McGee holds a 70 percent working interest in seven of the leases, Armstrong the remaining 30 percent. Armstrong holds 100 percent of the eighth lease, but has told the state it will also be assigning 70 percent of that lease to Kerr-McGee.

Armstrong filed for the unit on behalf of itself and Kerr-McGee, proposing a five-year unit plan of exploration with three exploration wells. Kerr-McGee drilled and tested the Nikaitchuq No. 1 this winter season and plans geologic studies and seismic reprocessing in 2005. Additional wells are planned for the 2006 and 2008 winter seasons, but the companies said they may be drilled earlier.

There are three prospects in the unit: the Cretaceous Brookian sandstone; the Jurassic Nuiqsut sandstone; and the Triassic Sag River sandstone.

The state said the first well, the Nikaitchuq No. 1, satisfies the first well required under the initial plan of exploration.

Failure to drill a second well or obtain approval of a revised plan of exploration by June 1, 2006, will result in the automatic termination of the unit effective that date; a third well — or approval of a revised plan — is required by June 1, 2008, or the unit will terminate.