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One more round for Kuvlum prospect Federal Beaufort Sea lease sale set for April 18; old oil prospect still available; North Slope Borough, whalers seek injunction By Ray Tyson For Petroleum News
All eyes will be on Shell Offshore and the still available Kuvlum prospect going into the third and final Alaska Beaufort Sea lease sale in the federal government’s current five-year oil and gas leasing program.
The U.S. Minerals Management Service, which recently scheduled Sale 202 for April 18 in Anchorage, is offering 1,654 exploration blocks covering about 8.7 million offshore acres, stretching from the Canadian border on the east to near Barrow on the west.
However, if upcoming Sale 202 follows the same general path as the two previous Beaufort Sea lease sales, most likely there will be a few companies chasing a handful of high-potential exploration blocks, including two (blocks 6762 and 6763) that make up part or all of the Kuvlum oil prospect, located roughly 15 to 20 miles northeast of Point Thomson, in the eastern Beaufort Sea.
ARCO discovered Kuvlum Kuvlum was discovered some 15 years ago by ARCO Alaska (now part of ConocoPhillips Alaska), which initially promoted the find as a potentially large reservoir requiring at least 1 billion barrels of recoverable oil equivalent to make it commercial due in large part to the field’s remote location. However, the Kuvlum venture failed to pan out. And ARCO gave up the leases to other companies, which eventually turned them back to MMS.
Kuvlum is believed to be the last of the named discoveries remaining in federal waters of the Beaufort Sea. Shell, the dominant player in the 2005 Beaufort Sea lease sale, placed winning bids on leases that made up the old Hammerhead prospect, as well as on the Kuvlum prospect. Sandpiper was taken in an earlier lease sale.
Shell made the 2005 Beaufort Sea lease sale a resounding success, accounting for $44.4 million of the $46.7 million in apparent total high bids and capturing 86 of the 121 tracts receiving bids.
“I would say the first two sales were a success, especially the last one,” John Goll, director of the MMS Alaska region, said in an interview with Petroleum News. “Of course that was due to Shell buying quite a bit.”
However, MMS did end up rejecting Shell’s Kuvlum bids in the 2005 sale, concluding that the $80,650 the company offered for each of the two tracts was below fair market value.
The Kuvlum blocks will be re-offered in the April Beaufort lease sale. “One set of tracts that we would expect some interest on is the old Kuvlum prospect,” Goll confirmed.
The Kuvlum and Hammerhead leases were relinquished in 1999.
Subsurface heavily faulted MMS’ official reserve estimate for Kuvlum ranges from 100 to 300 million barrels of oil. But the subsurface is believed to be so heavily faulted it will require additional drilling and 3-D seismic to figure out the field’s true potential.
Another potential hot spot in the upcoming Beaufort Sea lease sale is six contiguous blocks, the largest concentration of leases in the entire sale, situated north of Smith Bay in the western portion of the sale area. These blocks were recently returned to MMS when their 10-year terms expired, Goll said.
“We, through internal information, see a number of (other) prospects, but we cannot go into detail on those,” he added.
Expect ruling before April 18 Once again, Alaska Native concerns over the potential effects of offshore drilling operations on Bowhead Whale migration and hunting have crept into an offshore lease sale. This time the North Slope Borough and Alaska Whaling Commission are seeking a preliminary injunction to halt Sale 202.
“Yes, that is still an issue,” Goll said, adding that the U.S. District Court in Alaska is expected to rule on the injunction prior to the April 18 lease sale. “We believe we have a strong case.”
In fact, MMS already has excluded from the April Beaufort lease sale offshore areas near Barrow and Kaktovik used by the Inupiat for bowhead whale subsistence hunting. And throughout the sale area, MMS will require that any offshore oil and gas activity be coordinated with the Inupiat whalers during their subsistence hunt.
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