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Producers 2020: Glacier suspends, restores, advances
The small independent shut-in its oil fields over low prices, retains gas production.
Eric Lidgi for Petroleum News
Few operators in Alaska better illustrate the recent uncertainties in the oil and gas industry than Glacier Oil & Gas Corp. The local independent announced development plans early in the year, then suspended operations at several fields in response to low oil prices and demand, and later reinstated some production as the economy improved.
The details of those decisions reveal the nuances of the Alaska oil and gas industry, especially the way market fluctuations are felt in different basins and commodities.
Glacier Oil & Gas operates the Badami unit on the North Slope through its subsidiary Savant Alaska LLC and operates the North Fork unit, the West McArthur River unit and the Redoubt unit in the Cook Inlet basin through its subsidiary Cook Inlet Energy LLC.
These properties make Glacier Oil & Gas is one of only two companies operating production in both of the major Alaska basins: the North Slope and Cook Inlet. The other company, Hilcorp Alaska LLC, is the dominant oil and gas producer in the state.
Glacier Oil & Gas was created in early 2016, as a result of the bankruptcy proceedings of the Tennessee-based Miller Energy Resources Inc. The company is currently led by President Stephen Ratcliff, who was promoted from vice president of drilling this year.
Badami Glacier became the operator of the Badami unit on the eastern North Slope through its acquisition of Savant Alaska. Savant had brought renewed focused to the geologically challenging unit after decades of work by former operator BP Exploration (Alaska) Inc.
In its most recent plan of development for Badami, submitted in late March 2020 and covering the year ending July 15, 2021, Glacier proposed a continuation of work from the previous year. The plan called for evaluating the B1-07 well to gain insights for developing other Killian sands prospects at the unit and possibly drilling additional prospects outside the Badami Sands participating area “as economic conditions warrant.”
The company brought the B1-07 well into production in May 2018, leading to a significant increase in Badami oil production. It was the first new drilling activity at the unit since 2012. The company expressed great optimism about the so-called Starfish prospect, saying that it could lead to exploration and development of similar prospects.
In its plans, the company also said it would continue permitting the proposed Badami East pad to become the base of operations for drilling at the eastern edge of the unit.
A few months later, in late May, Glacier asked for permission to suspend operations and production at Badami through July 15, 2021. The request essentially extended the previous development plan by one year, requiring no additionally work commitments.
“The present global condition of low crude oil prices, combined with a lack of demand, obligates Glacier to act as a prudent operator and suspend operations until both demand and market price have sufficiently recovered to justify the resumption of production operations,” the company wrote in its request. “This change in operating status to an (Suspension of Operations) will be undertaken with the intent to re-start operations.”
The suspension placed the unit into warm-standby status with a small crew to oversee facilities including field infrastructure, the Badami Pipeline, and a small private airstrip.
The company also said it would restart production sooner than the deadline, if warranted by larger economic conditions. Those conditions arrived by the end of the summer. In mid-August, Glacier announced plans to restart full Badami operations in late September.
The company also revealed that it had decided to use the early summer suspension period to undertake “a significant turnaround operation and inspection” of equipment across the Badami unit. “The scope of this work is extensive and there are tanks and equipment that have not been inspected and serviced since installation,” the company explained.
It is common for North Slope operators to temporarily suspend operations in the summer months to accommodate major maintenance and upgrade activities. In a sense, although unplanned and likely undesired, the shutdown this year provided a similar opportunity.
Although partial year-over-year comparisons can be imperfect, oil production at Badami was declining before the suspension in May 2020. The unit produced 161,115 barrels of oil in the first four months of 2020, compared to 229,122 barrels of oil during the same period in 2019, according to the Alaska Oil and Gas Conservation Commission.
WMRU and Redoubt Recent swings in the economy also led Glacier Oil & Gas to suspend operations at its two offshore units on the west side of Cook Inlet: West McArthur River and Redoubt.
The development plans for the West McArthur River unit over the past two cycles have been slight and focused mostly on conversions and repairs, rather than drilling activities.
Glacier is looking to convert a shut-in well at the unit for use as a disposal well. The company is also planning a workover to restore production at the Sword well following a failed electric submersible pump but wants to time the project with other well activity.
And the company is continuing permitting activities on its Sabre project. The long-proposed offshore development calls for drilling an exploration well with a jack-up rig.
At the moment, only two of the 11 wells at the unit are producing - WMRU No. 2B and WMRU No. 6 - both from the Area No. 1 participating area. The unit produced approximately 183,338 barrels of oil and 34.8 million cubic feet of natural gas in 2019.
In early April, the state approved the current development plan, covering activities through April 30, 2021. But in late May, Glacier Oil & Gas applied to suspend operations from the West McArthur River unit and the associated Sword participating area through the remainder of the current development plan, citing low prices and flagging demand.
Under the plan approved by the state in early June, Glacier Oil & Gas was required to take preventative measures to protect wells and other infrastructure and was required to provide quarterly updates starting at the end of August and carrying through next April.
Glacier Oil & Gas has been busier at the Redoubt unit than at West McArthur River.
The company drilled the RU-6A sidetrack last year as a water injection well to enhance oil production at the field. The company also worked over the RU-2A well, replacing an electric submersible pump and adding perforations. The company deferred a plan to replace a failed electric submersible pump in the RU-9 well until later this year.
Redoubt produces from four of its nine wells - RU No 1A, RU No. 2A, RU No. 5B and RU No. 7B - 435,350 barrels of oil and 92.2 million cubic feet of natural gas in 2019.
In its original plan for this cycle, running through April 30, 2021, Glacier said it would work over the new RU-6A sidetrack to add perforations and also to improve injection capacity. The company said it might drill an additional well or sidetrack, if warranted.
And the company expressed interest in exploring the leases north of the Northern Fault Block at the unit, although the project would require “favorable economic conditions.”
Those conditions have yet to materialize.
In late June, a month after requesting permission to suspend operations at West McArthur River, the company asked the state for permission to suspend operations at Redoubt.
Under a plan approved by the state in early July, Glacier Oil & Gas suspended operations from its Osprey platform but maintain limited operations on its RU-D1 disposal well. The company also switched its power source to a diesel-powered generator fueled by two temporary tanks - 5,000 and 16,800 gallons - placed at the Kustatan Production Facility.
As part of the suspension, the state required regular reports. The company released its first quarterly report in early September 2020. According to the report, Glacier said it had shut-in the Redoubt wells from its Osprey platform, drained its pipelines, switched its power source, inspected its Brucker escape capsule, and was freezing facilities for winter.
Overriding royalty interest holder Dan Donkel appealed the decision to suspend the units, saying that the decision was not supported by evidence and that the state had failed to solicit public comment or to notify interest holders before allowing Glacier to proceed.
Unlike the summer turnaround at the Badami unit, Glacier Oil & Gas had yet to restart production at the West McArthur River unit or at the Redoubt unit by early September.
North Fork The North Fork unit has fared better over the past year. As a natural gas field under medium-term contracts, it is less susceptible to short-term changes in price or demand.
In recent years, Glacier Oil & Gas has promoted “small ball” projects at the onshore unit in the southern Kenai Peninsula, north of the city of Homer. In looking for these projects, the company values relatively easy and affordable work that improves gas production.
As an example from the past year: a workover at the NFU 22-35 well in April 2019 added perforations to the well, increasing production by 1 million cubic feet per day.
The plan for the current development year, running through March 2021, called for a similar range of smaller projects but did not provide any details on those activities.
The North Fork unit produced 1.3 million cubic feet in the year ending June 2020, down from 1.4 million cubic feet in the preceding 12-month period, according to the AOGCC.
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