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Oil Patch Insider
Exploration drilling: A wait and see game Exploration drilling on Alaska’s North Slope is “on the wrong end of the dog” an oil company executive told Petroleum News recently — and for good reason. All indicators point to a slow 2004 winter drilling season, maybe slower than the 2003 season, which saw the fewest number of exploration wells drilled on the North Slope since before the start-up of the trans-Alaska pipeline in 1977.
In 2003, five oil exploration wells were drilled outside of existing producing units on the North Slope, including one by ConocoPhillips in the National Petroleum Reserve-Alaska; a Beaufort Sea well by Canadian independent EnCana in partnership with ConocoPhillips and ChevronTexaco; and three Harrison Bay wells by newcomer Pioneer Natural Resources, a Dallas-based independent partnered with Armstrong Resources, a subsidiary of Denver independent Armstrong Oil & Gas.
It’s too early to say exactly how many wells will be drilled next winter, but state Division of Oil and Gas Director Mark Myers told Petroleum News on May 13 that early indicators point to three or four oil exploration wells if you’re excluding development drilling within producing units, such as the Titania prospect where ConocoPhillips must drill a well as part of its deal with the state to hold the leases in the producing Colville River unit (commonly referred to as Alpine, the major field within the unit).
“Winstar’s well looks like a go,” Myers said, referring to the Alaska-based independent’s 1,280 acres prospect. “That’s a Kuparuk extension well, but I’d still label it an exploration well. … But the Slugger well probably won’t go. There will be some peripheral wells in Kuparuk, but those aren’t exploration wells. Total is looking at one well in NPR-A.”
Bill Van Dyke, petroleum manager with the division, concurred with Myers.
“Three to four wells is probably … a reasonable number, if you’re talking about true exploratory wells, and forgetting about development wells. That would cut out ConocoPhillips' well at Placer, some Kuparuk (River unit) wells, Titania at Colville. … I think what’s going to happen is we’ll see two to three exploration wells in NPR-A.”
A federal official who works for a division of the Department of the Interior in Alaska told Petroleum News May 14 that he doesn’t expect more than three new wells in NPR-A next winter: “ConocoPhillips has moved its rig off Puviaq, where it drilled this past winter. … That’s not a good sign. (See related story on page11.) Two wells, including TotalFinaElf’s well might be a more realistic number for winter 2003-2004. A lot depends on what Anadarko decides to do — in NPR-A, the Brooks Range Foothills and central North Slope. … But without a gas pipeline, I don’t see them taking a chance on the foothills. Not yet,” he said.
Anadarko Petroleum’s Alaska spokesman, Mark Hanley, told Petroleum News May 14 that the company does not intend to drill another Hot Ice well this winter; rather it will complete the one it started this past winter. And it’s “too early to tell about next winter’s more traditional exploration wells,” he said.
Exploration tax credits get positive response “Right now we’re going through our whole portfolio,” Hanley said, which includes prospects in Canada, Algeria, U.S. Gulf of Mexico, Tunisia, Australia, Congo, Qatar, and other countries.
One thing that might increase the number of wells drilled next winter is the exploration tax credit program Alaska Gov. Frank Murkowski has asked the Alaska Legislature to approve this session. (See related story on page 1.)
Companies could start compiling credits July 1, the first day of the next fiscal year, and turn them into the state a year later.
In mid-May, the oil companies that do business on Alaska’s North Slope were still studying the incentive package, but those that would comment were encouraged by the possibility of a tax break to stimulate exploration drilling.
“We’re looking at it (governor’s tax credit proposal) now, but obviously anything that can make us drill more wells makes a positive statement. … I think it will improve the economics of prospects. What does that mean as far as drilling next winter? It’s too early to tell,” Hanley said.
ConocoPhillips Alaska spokeswoman Natalie Knox told Petroleum News May 13 that the company had just received information on the tax credit program and would be reviewing it. ConocoPhillips is pleased, she said, that the administration is looking for way to help the industry increase exploration activities in Alaska. BP’s acreage sale could bring in new players Another thing that could impact the numbers of exploration wells drilled next winter — albeit to a lesser degree — is BP Exploration (Alaska)’s sale of its exploration acreage outside of producing units and the Arctic National Wildlife Refuge.
In April, the company confirmed it had sold 594,900 net exploration acres in NPR-A and the Brooks Range Foothills to Anadarko. (See May 4 Petroleum News article.)
Sometime in May, the company is expected to release the winning bids on 400,000 exploration acres on the North Slope outside of ANWR, the foothills and NPR-A which it put out for bid last year to a qualified group of 15 companies, including independents, “positioned to prospect the leases.”
Speculation has it that Talisman Energy is one of the successful bidders for BP’s North Slope acreage. The Canadian independent’s CEO said May 7 that Talisman was entering Alaska “within two weeks” and had its eye on at least four prospects of 300 million to 500 million barrels each. (See story in May 11 Petroleum News.) Rocky Mountain high: EnCana’s founding fathers travel to Emerald Lake Lodge When you aspire to be “best-in-class” you don’t travel second class and no-one could accuse EnCana of that.
The two “founding fathers” of the ambitious Canadian independent, along with the remaining directors and senior executives, are heading for the Canadian Rockies next month to seek guidance and inspiration.
They’re booked into the picture-postcard Emerald Lake resort in eastern British Columbia’s Yoho National Park to develop a five-year plan for the company that includes unseating BP and ExxonMobil as North America’s leading natural gas producers.
The leading brainstormers will be Chairman David O’Brien and Chief Executive Officer Gwyn Morgan, the driving forces behind last year’s merger of PanCanadian Energy and Alberta Energy Co. to create EnCana.
O’Brien and Morgan told the Toronto Globe and Mail that the four-day mountain retreat will explore ways to build on EnCana’s asset base, whose potential they have only realized since the merger.
Morgan has his sights fixed on building the “supermajor of the gas business in North America,” while O’Brien’s vision extends to a “Canadian-based major international player.”
But Morgan said EnCana does not currently “have an appetite for a big, major corporate deal.”
Herrera committed as long as ANWR remains viable Roger Herrera, Arctic Power’s Washington, D.C. representative and Petroleum News’ most accurate source for oil price predictions, announced his retirement in January, saying he was going to retire in the spring.
But, lucky for the state of Alaska, he has decided to stay with Arctic Power. He told Steve Sutherlin, Petroleum News’ associate editor, that he is committed to his post as long as the prospect of exploring for oil and gas in the Arctic National Wildlife Refuge remains a viable proposal.
“While it seems to be a viable project, I’ll be here,” Herrera said. “If I do my analysis and determine the issue is dead, I’m out of here.” Canadian research agency makes case for ‘nuking’ oil sands Nuclear power could be the answer to mounting concerns over the use of natural gas in the development of Alberta’s oil sands, a preliminary study has concluded.
The Canadian Energy Research Institute, hired by Atomic Energy of Canada, estimates nuclear energy would be economic provided gas prices don’t fall below US$3.50 per million British thermal units.
The findings are the first from a study started in January that is due for completion by the fall.
Currently, natural gas is used to generate steam, which is then pumped into the ground to melt the oil sands deposits and force them to the surface. It is also used as part of the upgrading process.
But even if the economics work, the notion of building a nuclear reactor in northern Alberta has yet to attract an enthusiastic response from oil sands operators, environmentalists or those concerned about the associated security risks.
Alberta Premier Ralph Klein has said he needs convincing that a plant would be safe. “I can’t say at this time whether I favor one at all,” he said, when the study was launched. Wil Condon gets job with Department of Law Wil Condon, attorney and commissioner of the Alaska Department of Revenue under former Gov. Tony Knowles, has a new position with the Murkowski administration — this time in both Anchorage and Juneau.
Condon is filling the position of two supervisors in the department’s oil and gas section. One was based in Anchorage; the other, Juneau. Bringing the job, safety home Nabors Alaska Drilling recently sponsored an oilfield rig orientation designed for spouses and families of their employees. Some 24 families participated in the first of several planned family oriented seminars which was held April 26 in Anchorage.
“Our objective is to provide the family members a greater awareness of what our employees do on the job during their two weeks away from home. We also emphasized the safety processes we employ on our rigs to prevent injuries and how these same techniques and principles can apply at home. We believe that by sharing what we do and our safety values with the families we not only develop better employees but also encourage safety at home,” Clyde Treybig, organizer of the Family Day event for Nabors, told Petroleum News.
Family members were also treated to lunch and door prizes.
Oil Patch Insider is compiled by Paula Easley and Kay Cashman with news coming from a variety of sources, including news tips and press releases from readers. Petroleum News writers in Anchorage, Calgary, Fairbanks, Houston and Washington, D.C. also supply news leads and briefs. If you have a news tip or press release for Oil Patch Insider, please email [email protected], phone (907) 522-9469, or fax (907) 522-9583.
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