Eni requests Oooguruk contraction delay

Division of Oil and Gas previously approved one-year delay; has just approved contraction delay for neighboring Nikaitchuq unit

Kristen Nelson

Petroleum News

Low oil prices, reduced oil demand and impacts of the COVID-19 pandemic have caused Eni to request delays in unit contractions at its two North Slope units, Nikaitchuq and Oooguruk.

The company requested a delay for Nikaitchuq in January; on Feb. 22, it requested a contraction delay at Oooguruk.

The Alaska Department of Natural Resources’ Division of Oil and Gas approved the Nikaitchuq deferral on Feb. 17.

An earlier Oooguruk contraction approval, granted in 2019, ran through the end of February.

Unit contraction reduces a unit to acreage within participating areas, PAs, the areas from which production is occurring.

In its Oooguruk request Eni provided the division with “technical notes” outlining its long-term plans to drill into areas in the unit which are not in PAs.

There are three PAs at Oooguruk: the Oooguruk Nuiqsut PA, Oooguruk Kuparuk PA and Oooguruk Torok PA.

When the division approved the 14th plan of development for Oooguruk in August, division Director Tom Stokes said that under the plan, which covers Oct. 1, 2020, through Sept. 30, 2021, Eni “proposes to maintain production, conduct maintenance, continue process optimization, engineering studies to reduce cost, and well planning for operations beyond the proposed period. No drilling or workover activities are anticipated.”

Appraisal wells under evaluation

In its contraction delay request Eni said contraction of the leases not included in PAs “will make it very unlikely that oil resources could be accessed and developed by any other operator in the area since the drilling paths of neighboring development projects are located farther away than the drilling path from the ODS and could result in stranded resources.”

Eni said the contraction delay is necessary because of the global oil price decline, lack of demand for oil “and the logistical interference of the COVID-19 pandemic.”

Those factors resulted in budget cuts at Eni, production curtailments and project deferrals at Oooguruk, the company said, and because of these temporary conditions which are beyond its control, it is requesting a further delay in the automatic contraction of the Oooguruk unit.

The Oooguruk unit was formed in 2003.

On Aug. 1, 2019, Eni succeeded Caelus Natural Resources Alaska as unit operator. Eni said there are 16 state leases, some 35,271 acres, in the unit.

Nikaitchuq deferral approved

Oooguruk and Nikaitchuq are adjacent and lie north of Kuparuk. Oooguruk is primarily offshore; Nikaitchuq is entirely offshore.

In granting the Nikaitchuq deferral, Stokes said Eni provided the division with “evidence that the Schrader Bluff reservoir extends outside the current participating area, and has described long-term plans to drill wells in this area.”

If the wells are drilled, and prove productive, that area would likely be included in the existing Schrader Bluff PA, he said.

Without a contraction delay, Eni may lose the right to drill there, and if the Nikaitchuq unit is contracted, Stokes said, “the resources outside the unit are unlikely large enough to justify development by another lessee who might acquire the area in a future lease sale.”

The area would also likely require “duplicative facilities to develop.”

“If the area is contracted from the NU,” Stokes said, “then the relatively small resource size and difficult development options could prevent development and thus strand State resources.”

Contraction of the Nikaitchuq unit was deferred through Sept. 30, 2022, which coincides with the expiration of the units next plan of development.