The Explorers 2018: Doyon plans to drill fourth Nenana well this summer
Alaska Native corporation is targeting oil in the northern end of the basin; sees potential at $50 oil
for Petroleum News
The exploration activities of Doyon Limited in the Nenana basin have been marked by two recurring features over the past 20 years: inner persistence and outer obstacles.
The Alaska Native corporation for the Interior region is planning to return to the Nenana basin this coming summer to drill its fourth well in the region in the past decade. The three previous wells followed a decade of start and stop efforts by private sector partners.
The upcoming drilling activity comes as changes in the world of Fairbanks utilities could upend natural gas supplies, forcing Doyon to shift its attention toward oil resources.
Working in partnership with Cook Inlet Region Inc., Doyon plans to drill the Totchaket No. 1 well this summer in the northern end of the Nenana basin. The proposed well would follow the Nunivak No. 1 well from 2009, Nunivak No. 2 well from 2013 and Toghotthele No. 1 well in 2016. Totchaket is based partly on the results of a 64-square-mile 3-D seismic survey from 2016-17. The survey followed large 2-D surveys in 2005 and 2012, a targeted 3-D survey in early 2015 and a targeted 2-D survey in early 2016.
An oil discovery at Totchaket in the range of 40 million to 60 million barrels would be viable with oil prices at $50 per barrel, Senior Vice President for Lands and Natural Resources James Mery told the Resource Development Council in January 2018.
An oil discovery of that size could be brought into production between 2023 and 2025, and possibly even sooner if the company decided to ship oil to Interior markets by rail or road, he added. And a natural gas discovery could potentially come online even sooner (although Doyon is currently skeptical about gas sales, given the state of the market).
The recent 3-D seismic survey identified five prospects in the northern end of the Nenana basin. Doyon plans to drill the approximately 13,000-foot Totchaket No. 1 well into the Totchaket East prospect. The company is particularly interested in indicators at 4,500 feet and 9,500 feet. The results of the well could spur a multiyear drilling program in the area.
GeologyThe three previous wells were all non-commercial for oil and for natural gas. But all three yielded intriguing results that convinced Doyon to continue with its exploration program.
The Nunivak No. 2 well, for example, penetrated several hundred feet of gas-saturated sand. But the pressure of the reservoir proved to be too low to support commercial production. Doyon blamed the low pressure on a failed hydrocarbon trap. With better geology, the reservoir could have produced some 150 billion to 180 billion cubic feet of gas, according to the company, enough to supply Fairbanks for more than 25 years.
The gas encountered in the well also included propane, which suggested a thermal origin - rather than a biogenic origin - and therefore the possibility of oil in the basin.
The Toghotthele No. 1 well supporting that oily hunch by encountering several dozen oil shows, suggesting that oil had flowed through the region without forming a reservoir.
The Nenana basin is shaped like an hourglass with a relatively shallow saddle in the central part of the basin near Nenana and deeper sections to the north and the south.
Doyon drilled its three earlier wells in the central saddle, hoping to find hydrocarbons that had migrated up from the deeper sub-basins. Recent seismic pointed to promising geology in the deeper of the two sub-basins, located north of the three previous wells.
The goal of the 3-D seismic survey completed in 2017 was to refine leads identified during the 2-D seismic survey conducted in the northern part of the basin in 2016. “The exceptional data quality from last winter’s 64-square mile 3-D seismic program coupled with our initial interpretation and review has resulted in the identification of several new and additional leads, compared to what we had expected,” Mery said in August 2017. “We are encouraged by this positive development with our Nenana basin program.”
The additional leads convinced Doyon and its partner Cook Inlet Region Inc. to delay tentative plans to drill as early as the winter of 2017-18 in favor of a summer well.
“We see multiple prospects at several horizons,” Mery said in late November 2017.
Totchaket No. 1 is designed to penetrate the Grubstake, Sanctuary and Healy Creek formations, primarily targeting light oil but also looking for gas. The primary source of hydrocarbons appears to be coal seams in the basin. The characteristics of the seams appear conducive to both oil and gas. Doyon plans to use Nabors 105 rig to drill the well at a site north of the confluence of the Nenana and Tanana rivers, approximately 10 miles west of the Parks Highway. The summer schedule will allow the company to access the site by barge from Nenana, some 20 miles south. An access road less than a mile long, built during the winter construction season, will connect the barge landing to the pad.
The prospect covers state of Alaska leases with Doyon-owned subsurface rights.
ObstaclesIn the past 20 years, no company has pursued a target outside of the two major Alaska basins with more persistence than Doyon has pursued its target in the Nenana basin.
The untraditional status of the project has occasionally led to complications.
A joint venture led by Andex Resources LLC acquired an exploration license in the Nenana basin in 2002, additional leases in 2003 and the first 2-D seismic survey in 2005. But the joint venture suspended the exploration project in 2006 and 2007 during debates over the Petroleum Profits Tax and terms for a potential North Slope natural gas pipeline.
Those legislative negotiations failed to accommodate the particular needs of the Interior, and Andex Resources abandoned the project before the state rectified the oversight.
Doyon successfully applied for an extension of the license, through 2012, and assembled a new five-party joint venture led by Denver-based independent Babcock & Brown Energy, which was later renamed Rampart Energy Co. The partnership drilled the 11,100-foot Nunivak No. 1 in mid-2009. The roughly $15 million well failed to find commercial volumes of gas but the result of the well nevertheless intrigued Doyon.
Uncertainty plagued the project again when the state backed a plan to bring North Slope liquefied natural gas to the Interior and to unify the regional electrical grid.
The four partners lost interest. Doyon decided to continue pursuing results it found interesting. Working alone, it commissioned a 2-D seismic survey in the northern end of the basin in early 2012 and drilled the 8,667-foot Nunivak No. 2 well in mid-2013.
Doyon continued the program independently for the 3-D seismic survey in 2015 but partnered with CIRI for the 11,379-foot Toghotthele No. 1 well in mid-2016.
Interior consolidationThe newest challenge involves changes to the natural gas market in Fairbanks.
In December 2017, the Alaska Industrial Development and Export Authority agreed to sell Pentex Alaska Natural Gas Co. to the Interior Gas Utility. If the sale closes, it would consolidate the two existing utilities in Fairbanks into one locally controlled company.
The merged entity would own the Titan liquefied natural gas plant near Point Mackenzie, a trucking operation for transporting the LNG to Fairbanks and a local distribution grid.
Pentex is currently building a 5.25 million gallon liquefied natural gas storage facility in Fairbanks and expects the project to be completed in the fall of 2019. An associated supply contract with Hilcorp Alaska LLC is expected to meet the needs of the project.
“Although our primary target is oil, our gas prospects are greater,” Mery said in December 2017. “So it is unfortunate timing to see the Interior Gas Utility ready now to commit to a course of action with AIDEA which will tie Fairbanks for at least a generation to imported LNG by truck at much less favorable price projections. This potential IGU purchase also eliminates the option for use of future Nenana gas as well as foreclosing future opportunities to tap into any North Slope gas export line.”
Yukon FlatsDoyon also owns about 1.5 million acres of subsurface lands in the Yukon Flats area north of Fairbanks and believes the geology of the region is similar to the Nenana basin.
The program was delayed for five years as Doyon and the U.S. Fish and Wildlife Service tried to negotiate a land swap in the region. The effort failed, although Doyon later determined that its existing acreage was more promising than it had originally thought.
The Nenana project has taken precedence, and the only exploration in the Yukon Flats was a 3-D seismic survey in the Stevens Village region in the winter of 2012 and 2013.