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Report indicates ANWR well unlikely to have found significant crude oil
Alan Bailey Petroleum News
A report in the New York Times has indicated that the infamous KIC No. 1 well, the only oil exploration well ever to be drilled in the coastal plain of the Arctic National Wildlife Refuge, failed to make a significant oil discovery. Chevron and BP drilled the well in 1985 and 1986; since when the results of the drilling have remained a closely guarded secret.
A 1987 lawsuit Reporters from the New York Times discovered intriguing evidence relating to a 1987 lawsuit in Cleveland, Ohio, indicating that the KIC well did not make a significant oil find. Apparently the lawsuit revolved around whether the shareholders of Standard Oil of Ohio, or Sohio, had been adequately compensated when Sohio became part of BP. A merger between the companies had been negotiated in 1968 - subsequently for a number of years BP’s activities in Alaska had been conducted as Sohio. At issue in the Cleveland court case had been whether, in the terms of the Sohio acquisition, BP had sufficiently valued its potential oil reserves in ANWR. Critical to that ANWR valuation were the results from the KIC well.
A worthless well? Although some documents from the court case are missing and critical transcripts from the court hearings were not made public, the fact that the eventual settlement with Sohio shareholders only involved a small increase in BP’s offer price suggests that little value was attached to the KIC well results. Moreover, lawyers representing a California public employee retirement system, a major Sohio shareholder, were allowed to see the drilling results and concluded that the results provided no legal basis for questioning the fairness of the price, the New York Times reported.
A lawyer who was involved in the court case told the New York Times that his recollection is that the KIC well was worthless. A person, who at the time of the case was a BP executive who prepared a deposition for the court, told the Times that his recollection is that there was no particularly encouraging find in the well. In addition, during the court case a Goldman Sachs banker testified that BP had led him to believe that the well results were not encouraging, the New York Times reported.
So what might this mean in terms of the oil potential of the ANWR coastal plain, the so-called 1002 area?
USGS assessment In 1998 the U.S. Geological Survey estimated that there may be somewhere in the range of 5.7 billion to 16 billion barrels of undiscovered, technically recoverable oil in the 1002 area. And, since the USGS has never had access to the results from the KIC well, those results have no bearing on the findings of the USGS assessment. Essentially, the USGS scientists identify distinct potential oil plays, known as assessment units, within a region such as the 1002 area. The scientists use seismic data to find possible oil traps within each play, subsequently using statistical techniques add up and evaluate the uncertainty of possible undiscovered oil volumes in the plays.
The KIC well was drilled in the more eastern part of the 1002 area, in a region sometimes referred to as the deformed area, because of the known presence of significant folds and geologic faults in the strata. Near the coast there are major structures with apparent similarities to the structures in the central North Slope where producing North Slope oil fields are located - this structural similarity likely influenced the choice of location for the KIC well.
Different geology However, the geology in this part of 1002 area is distinctly different from that of the central North Slope. In particular, many of the older rocks that sourced and reservoired oil in the central North Slope were eroded out at some time in the geologic past. The older rocks are preserved in some sunken faulted blocks, offshore under the Beaufort Sea, but it is not clear whether this phenomenon extends under the onshore region.
USGS geologist Dave Houseknecht, an expert on North Slope petroleum geology, has told Petroleum News that, although there is uncertainty regarding the presence of two major source rocks, the Shublik and the Kingak, in the eastern 1002 area, there is good evidence for the presence of at least two good source rock intervals in the younger Brookian sequence, including the Hue shale/GRZ. And potential Brookian reservoir rocks are definitely present.
In the more westerly part of the 1002 area, the subsurface strata are relatively undeformed. The exploration interest here would primarily be in stratigraphic oil traps, traps formed from the manner in which the sediments that formed the rocks were deposited. With known significant thicknesses of Brookian strata in the region, the exploration plays would be analogous to those in which major oil finds have been made in the Nanushuk and Torok formations to the west of the central North Slope.
- ALAN BAILEY
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