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Hunt for Badami oil outside PA continues
Alaska’s Division of Oil and Gas approves Glacier Oil’s 16th plan of development for eastern North Slope unit, production falling Kay Cashman Petroleum News
Savant Alaska, a Glacier Oil and Gas company, continues to move cautiously forward with its search for undiscovered oil at Badami on the eastern North Slope of Alaska.
After stepping out of its comfort zone of low-risk maintenance and well work in 2018 to drill exploration well B1-07 in the Starfish prospect outside the Badami Sands participating area, the company announced an oil discovery in the Killian formation that it quickly brought online.
The 16th plan of development, or POD, for the Badami unit was filed April 15 and approved by the Alaska Department of Natural Resources’ Division of Oil and Gas on June 17.
The POD is a “basic plan” that calls for “investing nearly $200 million (gross) to prosecute a Killian-focused drilling program over the next 3-4 years” at Badami, Glacier President Phil Elliott told Petroleum News in an April 10 email.
The outlay represents a much larger investment than the chunk of Glacier’s capex of (net) $20 million in 2018. (In addition to Badami, the company operates three units in the Cook In let basin - West McArthur River, Redoubt and North Fork.)
Glacier promised to do the following during the term of the POD, which is July 16 through July 15, 2020:
* The company is currently working on a permit to construct a new Badami drilling pad, the “Dock Pad,” which will be the surface drilling pad for additional Killian wells drilled toward the eastern side of the Badami unit.
* The B1-01 well workover will include pulling and replacing tubing; Savant also will run a casing inspection log for evaluation purposes.
* Convert the B1-14 well to a gas injection service well (AOGCC has approved this conversion).
Glacier says these operations will “occur during the second and third quarters of the 2019 POD period.”
In the June 17 approval letter acting division Director James Beckham told George Morris, Savant’s chief operating officer, “The division remains encouraged by Savant’s continued efforts to develop the Badami unit’s resources and looks forward to further positive production development soon.”
Looking for more pools Further, the company says Savant continues to evaluate B1-07 production, as well as assess additional drilling prospects within the Badami unit but outside the Badami participating area. A turbidite sandstone reservoir slightly older than the Badami’s Brookian reservoir, the Cretaceous Killian interval is immediately above the oil source rock and below the Badami sands that form the main reservoir for the Badami oil field. In early testing the B1-07 well produced 2,500 barrels per day.
Describing the Starfish project in September 2017, a Glacier official said, “If this well works close to what we think it will, it should open five to seven more prospects similar to it.”
In its 2017 POD, Glacier described Starfish as one of “several new target pods of interest” identified through a recent geologic and geophysical review of the Badami and Killian sands. It says something similar in both its 2018 and 2019 PODs.
Up to 10 new wells Glacier’s application with the U.S. Army Corps of Engineers for a permit to construct Dock Pad inland 1.3 miles from Mikkelsen Bay will accommodate the drilling of up to 10 new wells.
The application says that pad construction involves excavating a 9.2-acre gravel pit, building an 800-foot access road and a 2.5-mile pipeline connecting the new pad to existing field facilities.
The pad itself will be square, with 660-foot sides, and will be due east of the existing Badami pad.
The Mikkelsen Bay pad proposal dates back to a unit expansion effort in late 2012, when Savant asked the state to add seven leases to the Badami unit, including six leases held by Alaska Venture Capital Group. Since that time AVCG has sold most of its interest in those six leases, with six companies now holding them, Caracol Petroleum being the largest leaseholder. Brooks Range Petroleum Corp. currently operates the leases.
The proposed lease expansion, which straddles the Beaufort Sea coast, would have extended the Badami unit east, closer to ExxonMobil’s Point Thomson producing unit, the eastern-most producing unit on the North Slope, just to the west of the Arctic National Wildlife Refuge 1002 area.
1971 well tested at 700 bpd The concept behind the lease expansion was to enable exploration drilling in the East Mikkelsen prospect that included the site of the East Mikkelsen Bay No. 1 well drilled by Humble Oil (predecessor to ExxonMobil) in 1971.
Using outdated technology, that well encountered oil in the Killian sands, with a tested flow rate of 700 bpd of 24-degree API oil.
In March 2013, the division approved inclusion of parts of two of the leases into the Badami unit but declined to expand the unit across the remainder of the seven leases: The approved expansion included the Mikkelsen well. The state argued that only those lease portions met the qualifications for a lease expansion.
In April 2013, Savant appealed the state’s decision, claiming that effective exploration of the prospect required access to all seven of the leases.
The appeal remained in limbo until July 2, 2018, when then-DNR Commissioner Andy Mack sent a letter to Glacier telling it the department had reviewed Savant’s appeal and was remanding the matter to the division for reconsideration.
As of June 21, the division has not yet issued a decision, although it appears the parties have discussed the matter.
Output falling Production from the eastern North Slope Badami unit, which is between the Prudhoe Bay and Point Thomson units, averaged 879 barrels a day in November 2015 prior to Glacier assuming operatorship in January 2016.
By January 2019, Badami was producing 2,323 bpd, with B1-07 accounting for 1,604 bpd.
In April, Badami had fallen to an average of 1,659 bpd - clearly an incentive for continued drilling, especially since the unit’s processing facilities can handle 38,500 bpd, a reminder of the ambitions of the original operator, BP Exploration.
It came as no surprise when Elliott told Petroleum News in the April 10 email that “The B1-07 well was an economic success and proved the prospective value of a Killian-focused drilling initiative,” noting the well was expected to “pay out in less than 15 months.”
Elliott did not indicate whether the company would be open to another partner at Badami. ASRC Exploration, owned by the Native regional corporation for northern Alaska, Arctic Slope Regional Corp., and others hold minority working interests in the Badami unit and surrounding leases, with Glacier owning approximately 67% of most leases.
Glacier’s background After emerging from bankruptcy protection in early 2016, the publicly traded Miller Energy Resources became the privately owned Glacier Oil & Gas Corp.
The changes appear to go far beyond leadership, name and ownership status.
Starting immediately after formation, Glacier pursued a different strategy than its predecessor, favoring caution and focus where Miller was ambitious and sprawling.
Following the reorganization, Glacier retained Miller’s North Slope and Cook Inlet holdings, including wholly owned subsidiaries Cook Inlet Energy and Savant.
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