Eni asks Nikaitchuq contraction delay

Steve Sutherlin

Petroleum News

Nikaitchuq unit operator and 100% working interest owner Eni made a formal request in a Jan. 21 letter to the Alaska Department of Natural Resources Division of Oil and Gas for a delay of a 10-year automatic contraction of the unit.

Eni said the request was due to “unusual circumstances creating temporary conditions beyond its control.”

As support for its request for delay of the unit contraction, Eni submitted technical notes outlining its long-term plans to drill further wells in the unit on lands outside the existing boundaries of the Schrader Bluff Participating Area.

The unit agreement stipulates that 10 years after sustained unit production begins, the unit area must be contracted to include only lands then included in an approved participating area, lands included in an approved unit plan of exploration or development, and lands that facilitate production including the immediately adjacent lands necessary for secondary or tertiary recovery, pressure maintenance, reinjection, or cycling operations. The DNR commissioner may delay contraction of the unit area if the circumstances of a particular unit warrant.

The Schrader Bluff PA was formed effective Jan. 21, 2011, with first production beginning Jan. 31, 2011. On May 26, 2016, DNR approved an expansion of the PA and revised the basis for allocation of production from an acreage to an oil in place basis, Eni said.

“It is important to note that in the event portions of the existing leases contract out of the NU, there is very little likelihood that another lessee could develop the area,” Eni said. “The amount of resources would not justify the extensive permitting and expense of adding an island for a drillsite, resulting in possible stranded resources.”

The leases affected by the request - ADL 388571, ADL 388572, ADL 388575, ADL 388577, ADL 388581, and ADL 388582 - lie offshore in the Beaufort Sea in the vicinity of Spy Island, approximately 3 miles north of Oliktok Point. They were added to the Nikaitchuq unit in an October 2007 unit expansion.

In approving the 2007 expansion request, DNR said that within the proposed expanded unit, potentially commercially recoverable reserves had been tested in the Cretaceous Schrader Bluff and the Triassic Sag River formations.

The request for delay in the contraction is necessary as the result of global oil price decline, lack of demand for oil, and the logistical interference of the COVID-19 pandemic, Eni said, adding, “All of these factors created an environment in which Eni sustained budget cuts, production curtailments and project deferrals in its operations plans for the NU.”

Nikaitchuq averaged 15,849 barrels per day in December, up 3.8% from a November average of 15,275 bpd, but down 22.9% from a December 2019 average of 20,564 bpd.