Brooks Range prepares to drill North Slope well

Kay Cashman

Petroleum News Publisher & Managing Editor

Just days before the partial results of a 2004 Wood Mackenzie study on the profitability of oil and gas regions around the world showed Alaska as one of the most profitable provinces at oil prices above $22 per barrel WTI, tiny Alaska-based independent Brooks Range Petroleum Corp. announced plans to drill an exploration well on Alaska’s North Slope later this winter.

The operating company for Kansas-based Alaska Venture Capital Group’s North Slope leases, Brooks Range is run by John Jay “Bo” Darrah Jr., the Kansas oilman who helped form AVCG in 1999, and former ARCO Alaska President Ken Thompson, who was impressed enough with AVCG’s slope prospects — including “a couple of past ARCO prospects” — to buy into the company last year.

If everything goes according to schedule, Brooks Range hopes to drill an exploration well on its offshore Gwydyr prospect from an onshore location in late March or early April.

The prospect abuts the western border of BP’s offshore Northstar unit and is two to three miles north of the Prudhoe Bay unit boundary. Once part of BP (62 percent) and AVCG’s (38 percent) Sakonowyak River unit, AVCG has recently picked up 100 percent interest in 17,151 acres on eight offshore and onshore state leases encompassing the original five-lease, 11,520-acre unit, which expired in 2003 when BP and AVCG backed out of drilling the same well on the acreage.

Brooks Range’s application with the Alaska Department of Environmental Conservation says the well will be drilled from an onshore ice pad on the west side of Gwydyr Bay, approximately six miles northeast of Prudhoe Bay’s S Pad. An ice road will be constructed to the proposed drilling location.

“The main target is several Kuparuk sands,” Darrah told Petroleum News in late January. Other targets include a deeper Sag River sand play and the Ivishak sand in the Sadlerochit group.

“The Sag River pay … showed up in the West Gwydyr well BP drilled out there,” he said.

The estimated reserves of the Gwydyr prospect are in line with the “leftovers” from the majors that the company has been targeting in its North Slope prospect development — i.e. smaller prospects near existing fields that hold in the range of 25 million to 75 million barrels.

“The P90 (low-case reserve estimate) is 25 million barrels in the Kuparuk sands, but the P50 (mid-case) is 87 million barrels for all formations,” Darrah said.

Permitting has been “a cake walk,” he said, because “it is the same well design that we permitted a couple years ago with BP, so essentially we’re just asking to have the permits re-instated.

“The only one real permit that we have had to write from scratch is the spill plan, the C plan, because under the old drilling plan with BP we were using their Prudhoe Bay spill response plan.”

The tough part: getting a rig

“We have to make a lot of things happen to get a well done this year,” including raising more money, which Thompson is in charge of, Darrah said.

Edgar Dunne, vice president of contracts and land for AVCG and Brooks Range, has worked with Houston-based First Diversified Financial Services on a private equity offering for the Gwydyr well.

“We’re still optimistic Devon (Energy) is going to show up, however,” Darrah said.

“We’re very hopeful we can drill this winter, but it’s hard to make a call on obtaining additional funding until we meet with the institutional groups,” Thompson said. “A number of private companies have also shown interest.

“We’ll be meeting with potential investors the second week of February. We’ll know soon after that if they are interested in proceeding this winter. If not, we’ll drill the well next winter,” he said.

So why did AVCG back out of the first well with BP, let the leases expire and then pick them up again?

“The prospect did not get funded in 2002 because at that time we had not solved the oil marketing and facility sharing problems — getting the oil off the North Slope without utilizing Prudhoe assets and their associated production back-outs. Since then Thompson and AVCG have solved that problem,” Darrah said.

“We’re working with ASRC Energy Services and others … on new concepts (to lower processing facility costs) such as smaller-scale and skid-mounted production systems — what we call ‘micro-processing units,’” Thompson said last fall.