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THE EXPLORERS 2005: First Alaska Peninsula sale draws $1.3M Shell Offshore, Hewitt Mineral took leases in Point Moller, Nelson Lagoon area in state areawide sale Kristen Nelson & Alan Bailey Petroleum News
The State of Alaska’s first Alaska Peninsula areawide oil and gas lease sale —the first state lease sale in the Bristol Bay area since the 1980s — drew two bidders Oct. 26, Shell Offshore Inc. and Hewitt Mineral Corp. out of Ardmore, Okla.
The state offered 1,047 tracts and received 37 bids on 37 tracts, some 213,120 acres, in the Point Moller and Nelson Lagoon area.
Mark Myers, director of the Alaska Division of Oil and Gas, noted after the sale that this was the first sale in the area in 22 years, “and we’re a long ways from any infrastructure, so I think it’s a good solid start in the evaluation.”
Myers said that while there weren’t a lot of takers, the area is relatively unknown. “When you look at the history of the North Slope, you might see a similar pattern — pre-Prudhoe vs. post-Prudhoe,” he said. This will likely be the first of at least 10 annual areawide sales on the Alaska Peninsula, he said, and called the sale “a healthy indicator of industry interest in the oil and gas potential of the Alaska Peninsula.” Shell the big bidder Shell bid $954,063 at the sale, a consistent $5.02 an acre, after returning to Alaska earlier in the year with bids of more than $44 million on Beaufort Sea federal outer continental shelf acreage.
Marcus Patterson, Shell Exploration & Production team leader for Alaska exploration, said after the sale that Shell looked at things “from a regional perspective” and focused on “the standard views that we have of the basin model.”
Patterson said the 33 tracts on which Shell bid were both onshore and offshore, about 190,000 acres.
Once the tracts are awarded, “we’ll start an evaluation program” on the acreage, he said. Shell has had several meetings on its plans in the area, “and will continue to engage the local stakeholders.”
The division said in its preliminary results that all 33 bids submitted by Shell contained a 4 cent error in the calculation of the bid deposit. The division said it was recommending that the commissioner of the Department of Natural Resources determine the error was “due to excusable inadvertence,” allow Shell to correct the error in accordance with the division’s regulations and the sale announcement, and that the corrected bids be accepted.
Hewitt an independent Hewitt Mineral, an independent oil and gas company and new to the state of Alaska, bid a total of $313,922 for four tracts, with $21.14 an acre on two tracts (the high per acre and total high bid of the sale, $121,767) and $6.11 per acre on two other tracts.
Myers said after the sale that he understood Hewitt became interested in the Alaska Peninsula sale after seeing technical data the division had at a convention in the Lower 48.
Alaska Gov. Frank Murkowski called the sale “just the beginning of an opportunity to bring new economic development to this region of Alaska,” and said the partnership between the state, local governments and regional organizations “to encourage new investment in this area is exciting and it is now showing results.”
Targeting variety of plays In purchasing leases around Port Moller and Herendeen Bay, Shell and Hewitt have set their sights on a section of the peninsula that has clear petroleum potential.
The area lies adjacent to the deepest part of the Tertiary Bristol Bay basin and also contains prospective Mesozoic strata. The Mesozoic strata include formations that are equivalent both to the productive source rocks of the Cook Inlet and one of the major source rocks under the North Slope.
Petroleum News asked Paul Decker of the division for his perspectives on the lease locations.
Shell has targeted an area on the southern edge of the Bristol Bay basin that also overlaps the northern edge of an area of large compressional structures in the Mesozoic, Decker said. The leases contain Tertiary reservoir and trap possibilities involving both folding and faulting of the strata.
Much structural interest And although little or nothing is known about the geological structures under the waters of Port Moller and Herendeen Bay, there’s enough of structural interest in the nearby onshore areas to be fairly certain that there also are interesting structures offshore.
“People bid where they know there’s structure because you can see it in outcrop and use seismic to project it in,” Decker said.
But some of the Shell leases do encompass one large onshore Mesozoic structure, the Staniukovich anticline, that contains a major seep of thermogenic gas. This gas appears to have originated from a Mesozoic source and Decker has speculated about the possible existence of a Jurassic Naknek gas reservoir deep inside the structure.
Hewitt’s leases straddle the junction between the Mesozoic compressional structures and the edge of the pull-apart or extensional features of the Tertiary Bristol Bay basin, Decker said. The leases contain a known major anticline, exposed at the surface in Jurassic strata. So a Mesozoic play in that type of Mesozoic structure could make a good exploration target.
Differing interpretations Differing interpretations by different geologists of the subsurface geology found in the Hoodoo Lake Unit No. 1 and Hoodoo Lake Unit No. 2 wells just to the north of the Hewitt leases lead to uncertainty about the subsurface geology of the area. However, a major fault exposed at the surface in the area of the leases indicates that the Mesozoic strata have been faulted over Tertiary strata of the Bristol Bay basin. So, there may be a play that involves drilling into Tertiary reservoirs just below the fault.
Decker also said there are almost certainly some interesting structures in the Mesozoic under the peninsula to the west of the new leases. But there’s a general lack of surface Mesozoic rock exposures and the companies have probably preferred areas where a bit more is known about the geology, he speculated.
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