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Caelus worries about economic situation, slows Nuna development
Because of the low oil price situation and worries about current fiscal uncertainty in Alaska, Caelus Energy is slowing its Nuna development in the North Slope Oooguruk field, Pat Foley, Caelus Energy senior vice president, Alaska operations, told a meeting of the Alaska Support Industry Alliance on Dec. 10. Foley said that his company had planned to be on the Slope this winter, installing flow lines and fabricating facilities but has postponed that work until next winter. However, the company still anticipates first oil from Nuna in late 2017, Foley said.
“All of our facilities are designed,” Foley said. “Our plan right now is to come back next winter and install the flow lines and get going full speed on facilities fabrication and still try and make our late 2017 oil start.”
With low oil prices pushing the state of Alaska’s finances into deficit, people in the state have been talking of adjusting the state’s oil tax laws and making changes to the tax credits that the state has been providing to encourage oil and gas exploration and development.
Foley said that the state’s current tax system, passed under legislation referred to as Senate Bill 21, had attracted Caelus to Alaska and that under this system the tax situation had started to settle down. But rumblings about possible tax changes are causing concern.
“As we look around today we’re starting to get a little bit nervous,” Foley said.
Oooguruk Caelus entered the Alaska oil and gas industry in 2014 when it purchased the Alaska assets of Pioneer Natural Resources, becoming the operator of the Oooguruk oil field. Oooguruk produces oil from a gravel island offshore in the shallow nearshore waters of the Beaufort Sea. The field went into production in 2008, with oil coming from two pools referred to as the Kuparuk and the Nuiqsut.
Nuna involves the development of a third, relatively shallow pool in the field, with development drilling and oil production from an onshore gravel well pad. Although the pad has been constructed, Caelus has yet to install any of the facilities required to produce oil from the Nuna pool.
However, Caelus has been forging ahead with continuing development in the other Oooguruk oil pools and is engaging in major hydraulic fracturing, or fracking, operations to invigorate oil production. During the next drilling season the company hopes to frack six wells, Foley said. And, with a measured depth of 22,200 feet, one of the Oooguruk wells is the longest that the company has ever drilled, he said.
Pioneer and Caelus have between them spent more than $2 billion on the Oooguruk field, which has produced about 23 million barrels of oil to date, Foley said. But despite the successful development of the field, the field has yet to make a profit, he said. Presumably field revenues to date have simply offset up front development and operation costs.
Smith Bay In a new venture on the Beaufort Sea coast, at a remote location about 150 miles west of Prudhoe Bay, Caelus is ramping up an exploration drilling project in the shallow waters of Smith Bay. The company hopes to drill two wells in the bay, in an area thought to be highly prospective for a significant oil discovery.
“It’s a very exciting exploration play,” Foley said. “Every person that I’ve seen exposed to this project, their eyes, they just light up. These are two wells that just need to get drilled.”
But Caelus expects to maintain tight confidentiality over the drilling results.
“Success will be if you see us back out there the next year,” Foley said.
The Smith Bay project in leases referred to as the Tulimaniq leases had originally been planned by NordAq Energy. But after purchasing a 75 percent stake in the leases in June, Caelus is now conducting the exploration program.
Caelus has mobilized Doyon’s Arctic Fox drilling rig and 35 barge loads of material to Cape Lonely, to the east of Smith Bay, in preparation for the start of the drilling season, Foley said.
“We’re just waiting for weather right now to construct our small ice roads, our two offshore drill sites … and we hope to spud in February,” he said.
Exploration block Caelus also has exploration interests in a 350,000-acre block of state leases to the east of Prudhoe Bay between Prudhoe Bay and Point Thomson. Foley said that Caelus has now received the data from a high-resolution 3-D seismic survey that the company conducted in this acreage.
“It’s phenomenal data. We’re really excited,” Foley said.
He commented that the Smith Bay exploration play, the Nuna development and the Caelus exploration prospects to the east of Prudhoe Bay all involve potential oil reservoirs in what are called Brookian turbidites. Turbidites are rocks consisting of sandstone layers and channels, laid down as a consequence of periodic submarine sand flows in ancient marine basins. The Brookian refers to the youngest and shallowest of the major rock sequences under the North Slope.
“They’re all really easy to identify on high-resolution seismic,” Foley said.
An excellent year Reflecting on activity at Oooguruk, the field that forms the centerpiece of Caelus’ Alaska operations, Foley said that his company had enjoyed an excellent year, with high production levels, with an exemplary safety record and with people engaged in community involvement both on the North Slope and elsewhere in Alaska.
“In 2015 we’ve had a great year,” he said. “We’ve produced about 4 million barrels. That’s the largest year of production that we’ve ever had.”
As a private equity funded company based in Dallas, the Caelus management team has a strong track record of success in oil exploration, Foley said. And when the company came to Alaska it wanted a stable and predictable environment that encouraged investment, he said.
“That’s the path we were on. That’s the path I hope we can stay on,” Foley said.
- ALAN BAILEY
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