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Jade files PTU Area F POD; Corps issues preliminary dredging permit
Kay Cashman Petroleum News
In coordination with ExxonMobil, operator of the Point Thomson unit, and other PTU lease owners, on Nov. 1 Jade Energy LLC filed its third plan of development for ADL 343112’s Area F, Tract 32, with Alaska’s Division of Oil and Gas. Tract 32 contains BP’s mid-1990s Sourdough oil discovery where Jade plans to drill an appraisal well in first quarter 2022.
Mobilization of a drilling rig and heavy equipment is one of the more challenging elements of Jade’s plans. Most drilling programs on the North Slope access their drill sites by ice or gravel roads as will Jade, but the Area F POD adds a barging program between West Dock and the PTU Service Pier to the mix as an intermediate step.
Jade expects to stage the rig, equipment and some additional materials required to support drilling into a laydown area designated by the PTU.
Barging operations would occur in the summer and require some lead time to organize, particularly given the fact that some dredging will be required to land a barge at Point Thomson and potentially depart West Dock.
As part of its second plan of development, the Alaska independent pursued approvals to conduct a small-scale scree operation on the PTU Service Pier Approach, including a permit from the U.S. Army Corps of Engineers.
On Nov. 2, the Corps sent Jade an unsigned copy of the permit. The recipient, Jade’s top executive and 50% owner Erik Opstad, was told if he accepted the permit’s conditions, to sign and return it to the Corps, along with a $100 permit fee. In turn, the Corps would send him a finalized copy of the permit.
On Nov. 3 Opstad told Petroleum News he had signed the permit and sent the check that morning.
The third POD for Point Thomson unit Area F, Tract 32, runs from Jan. 1, 2021, through Dec. 31, 2021. Jade became majority owner and operator of PTU Tract 32, ADL 343112, in the southeastern portion of Area F, by agreement with ExxonMobil Alaska Production in mid-2018.
Accomplished in second POD Among, but not all, the work done in the second POD period identified by Jade in its third POD filing was data evaluation. “Ongoing work conducted as part of developing the 2nd POD raised several concerns relative to Area-F development, Jade wrote.
Given Jade’s interpretation of the Sourdough volumetric resources, at current oil prices development did not appear to be economically viable, particularly when burdened with a 40% net profit share and a 12½% royalty, neither of which the division was able to modify.
During first quarter 2020 Jade and the agency “engaged in an intense and lengthy bout of economic modeling of Area-F resources using State of Alaska methodology. The details and results of that work are confidential under 38.05.035A(8), but we can say that the parties now understand the economic challenges to commercial development of Area-F,” Jade said in the third POD.
Among other things, a repeat bathymetric survey was also done in the second POD period. In September Jade executed the first offshore bathymetric survey of the PTU Service Dock Approach conducted in Alaska using a helicopter. Although one of Jade’s parent companies (ELKO International LLC) had been using helicopters to survey onshore lakes for several years to meet state permit requirements, “this fall was the first time those techniques had been employed in the offshore environment,” Jade said.
In the last 60 days of 2020, Jade expects to further progress both of these second POD priorities, as well as others, recognizing that “COVID-19 impacts could well worsen and we expect that many of Jade’s commercial endeavors and deal making capabilities will continue to be constrained by the difficult business climate that currently exists in the Alaska oil patch,” Jade told the division.
Third POD activities The goals and objectives under the third POD are similar to those in the first and second PODs but differ slightly in detail, as work is accomplished. In no specific order they include but are not limited to:
1. Permitting - One of the primary goals is to complete the permit package. Jade said its focus is primarily on getting a Plan of Operations approved because it is more time-consuming than other permits. Other major permits such as the permit to drill are equally important “but tend to be less problematic when it comes to gaining approvals.”
2. Economic enhancement - Jade feels that the economics of the project can be materially improved, but such improvement will take participation from all stakeholders. One goal in 2021 is to work toward facilitating material improvement of project economics.
3. A third bathymetric survey - Given the importance of the PTU Service Pier Approach bathymetric survey data to Jade’s mobilization plan “we will want to keep a close eye on those characteristics.” Using a helicopter in the September survey provided “significantly higher resolution than other methods. This game-changing methodology offers cost saving of 90% compared with other techniques,” Jade said, noting it expects to run these surveys “whenever needed to characterize area bathymetric conditions on or offshore.”
4. Mobilization planning - Although not forgotten, Jade said, mobilization planning was on the back burner for much of 2020 once it became clear that drilling would be delayed at least a year (until early 2022) “and perhaps longer given the COVID-19 pandemic … coupled with O&G project funding challenges due to ANS crude price weakness and Alaska tax uncertainties.” In 2021 Jade intends to develop a detailed barge mobilization plan for Nordic Rig 3 while also examining a snow trail alternative that may now be possible due to the availability of new technology.
- KAY CASHMAN
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