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Doyon optimistic on prospects at Nenana Tells House Resources that it hopes to find oil & gas in the basin from further drilling; oil likely to be more marketable at present Alan Bailey Petroleum News
James Mery, vice president for lands and natural resources for Doyon Ltd., told the Alaska House Resources Committee on March 11 that the Native regional corporation views an oil discovery in the Nenana basin, a large sediment-filled trough southwest of the city of Fairbanks, as the best potential outcome from the corporation’s exploration program in the basin. The corporation has already drilled two exploration wells, the Nunivak No. 1 and No. 2 wells, in state leases in the central part of the basin, west of the town of Nenana. And having recently completed a 3-D seismic survey in that same area, Doyon is “looking hard” at drilling a third well in 2016, Mery said.
“We view the chance of success in the next well for oil is somewhere between one in five and one in 10,” Mery said. There is plenty of spare capacity in the trans-Alaska pipeline for oil from Nenana and oil could be shipped from the basin by truck, rail or pipeline, he said. The minimum economically viable field size would be between 25 million and 50 million barrels, depending on the price of oil, Mery said.
Mery sees an even higher probability of finding a significant gas resource from future drilling in the basin.
“Gas is so de-risked at this point, we believe, based on work that we’ve done, that there is 50/50 chance of commercial success next time we drill,” he said.
Stranded gas But gas is less commercially attractive than oil at present, Mery said. If Doyon were to make a significant gas find in Nenana, the gas would likely remain commercially stranded for the next 10 to 12 years as a consequence of projects that are aiming to bring gas to Fairbanks, by trucking liquefied natural gas to the city, for example, he said. Mery was presumably referring to the Interior Energy Project, a project sponsored by the Alaska Industrial Development and Export Authority to bring affordable natural gas to Fairbanks and the Interior.
“We don’t have a product to offer right now, but it is a complicating factor for us,” Mery said.
However, the Nenana basin does enjoy a number of advantages in terms of its location - it sits next to the Parks Highway, the Alaska Railbelt electrical intertie and the Alaska Railroad. Pump station 7 of the trans-Alaska oil pipeline is just 60 miles away, while North Pole oil refineries and the associated section of the pipeline are 70 miles distant by road.
The route of a proposed major gas line for transporting North Slope gas to a liquefied natural gas plant on Cook Inlet passes close to the Nenana basin, although Doyon does not yet know what the practicalities would be of feeding Nenana gas into that line, or what the economics might be of processing the gas through a liquefaction plant.
Exploration results Doyon bases its optimism over the oil and gas potential of the Nenana basin on the results of its seismic surveying and drilling in the basin. While neither of the two Nunivak wells encountered a commercially viable pool of oil or gas, rock samples from the wells included excellent potential oil and gas source rocks. And, although those source rock samples had not reached the temperatures required to generate hydrocarbons, seismic data have made it possible to trace the source rock horizons into deeper sections of the basin, where temperatures should be high enough for oil and gas to form. The projection into the deep basin of heat measurements from well bores indicates that there is plenty of heat for the generation of hydrocarbons, Mery said.
The basin is more than 20,000 feet thick, he said.
In addition, Doyon found so-called “wet gases,” such as propane, butane and pentane in the well bores. These materials typically indicate the presence of a petroleum system conducive to the formation of oil, in a basin where some combination of oil fields, gas fields and mixed oil and gas fields may all exist, Mery said.
“We have all the elements of an active and prolific wet gas, condensate and hopefully oil system,” Mery said. “Through modeling we really believe that the basin, given the thick packages of source rock, really could have produced billions of barrels of oil and trillions of cubic feet of gas.”
Moreover, the rocks encountered during drilling in the Nenana basin include world-class oil and gas reservoir rocks, he said, also commenting that there are subsurface geologic features that could trap hydrocarbons.
Mery also commented on the value of state tax credits in improving the economics of oil and gas exploration in locations such as the Nenana basin.
“We think these (credit) programs have worked exceptionally well,” he said.
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