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Division questions Alliance plan update
Says that work commitment in Guitar unit is not contingent on adding a further lease to the unit in time for exploration drilling Alan Bailey Petroleum News
Alaska’s Division of Oil and Gas has questioned statements made by Alliance Exploration LLC in an exploration progress report filed for the company’s Guitar unit on the southwestern side of the Prudhoe Bay unit on the North Slope. The company commented that complications arising from the need to add a lease into the unit were jeopardizing the drilling of a well and that the company had informed the Alaska Department of Natural Resources, prior to unit formation, that drilling a well in the unit was premised on the division assigning the additional lease. The company told the division that it had understood that this lease would be assigned in the fall of 2017.
The division’s August 2017 approval of the formation of the Guitar unit required the drilling of an exploration well in the unit by March 31, 2019.
In a May 16 letter to Alliance, division Director Chantal Walsh said that Alliance’s update report contains several inaccurate statements. In particular, neither Alliance’s application to form the Guitar unit nor the division’s approval of the unit formation makes mention of the assignment of the additional lease to the unit, nor of the lease assignment being integral to the unit plan of exploration, Walsh wrote.
Three state leases The unit consists of three state leases, which had previously formed part of the Hemi Springs unit, formed in 1983 and terminated in 1992. Alliance has a 100 percent working interest in the leases, while Samuel Cade and Daniel Donkel have small overriding royalty interests. The additional lease, which Alliance claims is integral to its exploration plan, sits at the northwest quadrant of what, with the three Guitar unit leases, would form a square shape.
ConocoPhillips is holding that fourth lease because the Hemi Springs State No. 1 well, drilled by ARCO in the lease tract in 1984, was certified as capable of producing hydrocarbons in payable quantities from the Kuparuk C.
In Alliance’s Guitar unit plan of exploration, approved by the division in 2017 in conjunction with the unit approval, the company said that it would drill a well in one of the three leases in the unit, preferably during the winter of 2018, but no later than the winter of 2019, depending on the permitting situation. The well would penetrate the Ivishak formation, the formation that hosts the Prudhoe Bay field reservoir, with a lateral well targeting a seismic anomaly in the Kuparuk C. Depending on the results from the first well, Alliance might drill a second well in the following year. And positive results from the first well would trigger a plan for delineation drilling, the plan said.
The plan did not mention access to a fourth lease.
Progress report Alliance’s unit progress report, filed with the division in April, says that complications surrounding the assignment of the fourth lease to the unit had delayed the drilling of a well but that the company has taken a number of steps to enable the well to be drilled by the March 31, 2019, deadline. Those steps include moves to acquire the fourth lease, the acquisition and processing of 3-D seismic for the unit; the hiring of a consultant to evaluate drilling targets; starting the permitting for the drilling; initiating the preparation of a contingency plan; preparing cost estimates for the drilling project; identifying a contractor for the drilling; and hiring an expert for the eventual marketing of oil from the unit.
Oil potential The division’s original approval document for the Guitar unit said that Alliance had used an interpretation of the logs from the Hemi Springs well to infer the location of the oil-water contact at the base of the Kuparuk C oil accumulation and has used 3-D seismic to trace that contact into the Guitar unit leases - the seismic interpretation suggests space for a potential oil accumulation up dip of the oil-water contact. Although Alliance’s well will target the Kuparuk C and Ivishak, oil shows have been demonstrated in the West Sak and Ugnu across the region, the document said.
Alliance has declined to comment to Petroleum News on the issues regarding its exploration plan status report.
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