Division denies Glacier’s Badami expansion

E. North Slope unit operator lacks sufficient work plan for expansion area, no geo proof of connectivity between unit, new area

Kay Cashman

Petroleum News

On remand from the commissioner of the Alaska Department of Natural Resources, the director of the Division of Oil and Gas denied an application from operator Savant Alaska to expand the eastern North Slope Badami unit in a decision issued on Jan. 22. Savant is a Glacier Oil and Gas company.

As Petroleum News previously reported, Glacier put Badami on the market in mid-November, using BMO Capital Markets Energy Group to handle the divesture. As of Jan. 26, the unit and its assets remain for sale on BMO’s website.

One of the selling points listed by BMO is the oil field’s “low risk, quantified upside development,” which includes “stacked pay horizontal development of the Killian sands” outside the Badami unit - i.e. in the proposed expansion area.

Savant restarted the eastern North Slope Badami pad in October after halting production in May because the price of oil had tanked. The suspension placed the unit into warm-standby status with a small crew to oversee facilities including field infrastructure, the Badami Pipeline and a private airstrip.

During the 24 days the field produced in October it yielded more than 2,000 barrels of oil a day, newly appointed Glacier President Stephen Ratcliff said in early November.

Turn-key operation

BMO said the “Hilcorp/BP retention of ARO and select plugging obligations limits buyer exposure,” noting the Killian sands are “primed for development following” its successful B1-07 well.

B1-07 was drilled in the East Mikkelsen prospect between Badami and the Point Thomson unit in early 2018 by Savant after it had been purchased by Miller Energy and Miller had emerged from bankruptcy as Glacier Oil and Gas, which renamed the prospect Starfish. The first Badami Killian oil discovery was made in the B1-38 well in 2010 by Savant before the company was purchased by Miller.

Savant’s common carrier Nutaaq pipeline, which also serves the Point Thomson unit, stayed in operation when the field was put in warm shut down.

According to Alaska Oil and Gas Conservation Commission records, Badami averaged 1,252 barrels of oil per day in March, down 7.7% from a February average of 1,357 bpd and down 31.1% from a March 2019 average of 1,817 bpd.

Seven wells in the Badami sands participating area produced 716 barrels in March; with the other 804 bpd coming from an “undefined pool,” which in fact was mainly the Killian. B1-07 produced 664 bpd and B1-38 140 bpd.

B1-11A was the highest Badami sands producer at 320 bpd.

Badami produced 173 barrels of water in March.

BMO also said Badami has produced more than 700 million barrels of oil since 2018 and “is currently making 1,250 barrels of oil per day,” with no explanation of the discrepancy between what Ratcliff said was the unit’s October output unless that’s what the field produced in November.

In its asset overview, BMO also said a “75 mi seismic survey covers entire block and confirms subsurface model” and that the “existing Glacier-owned, BP-constructed infrastructure supports full field development and optionality for third party revenue/volumes.”

BMO pointed to Badami’s “38,500 bo/d facility with capacity for additional volumes on or offset the unit” and “multiple access points via barge landing and 5,500 ft airstrip.”

Another one of BMO’s bullet points was the “70 mbo/d capacity Nutaaq pipeline owned and operated by Glacier (12” diameter, 25 miles long) that connects Point Thompson and Badami to Endicott.” Nutaaq is a common carrier line.

Two reasons for denial

Section 11.1 of the Badami unit agreement says the unit operator should, “when warranted” expand the unit area to include “any additional lands determined to overlie any reservoir, any part of which is within the unit area.” While there is current production from Killian sands in the Badami unit and evidence of Killian sands outside the unit in the proposed expansion area, the data provided by Savant in its application (and more recent updated data provided in December) “does not support a reasonable interpretation” that the Killian reservoir in the unit extends into the leases in the proposed expansion area, including the leases that were partially approved in the 2013 decision. Because Savant’s data neither shows that any additional lands in the leases at issue overlie any part of the existing Badami unit reservoir nor that the unit reservoir is in communication with any other reservoir in the proposed expansion area, the division denied the unit expansion request and vacated the entire 2013 decision (see sidebar to this story).

The division gave a second reason for turning down the expansion, saying Savant “did not provide sufficient plans to develop the expansion area.”

A little background

In a July 25, 2019, letter to Savant, the division asked the company to provide an updated work plan that reflects current dates and work commitments because the original work plan attached to the application, submitted almost seven years prior (November 2012), was out of date.

The agency also made a point of saying Savant was “not at fault” but the passage of time made the plan sufficiently out of date, forcing the division to make considerable assumptions about the company’s current work commitments and timeline. An updated work plan therefore was necessary for the division to consider any work commitments as part of the remanded application.

The proposed expansion area covers 10,121.33 acres. The division partially approved the application in its March 15, 2013, decision. Savant appealed that decision and the matter was remanded to the division by the DNR commissioner on July 2, 2018.

The division received additional material on Dec. 11, 2020, from Savant in support of its application.

Upon remand and “comprehensive review of record,” the division denied the application finding that the proposed expansion of the Badami unit did not promote conservation of all natural resources, did not promote the prevention of economic and physical waste and did not provide for the protection of all parties of interest, including the State of Alaska, per AS 38.05.180(p); 11 AAC 83.303.

State approves Badami expansion

The Alaska Department of Natural Resources has agreed to expand the Badami unit to include portions of two leases overlying the East Mikkelsen oil prospect but will not include an additional five leases also requested for expansion by two leaseholders.

The expansion adds some 2,204 acres from ADL 391001 and ADL 390825 along the eastern edge of the unit, which is currently the easternmost producing field on the North Slope. The leases overlie a known Brookian reservoir in the Killian sands tested by Humble Oil & Refining Co. on ADL 390825 in 1971 with its East Mikkelsen No. 1 well.

With the ruling, Badami-operator Savant Alaska LLC must drill an exploration well in the expansion area next winter. The directional well would target the Hue Shale, allowing Savant to test the entire Canning formation, including the Badami and Killian intervals.

The two leases are held by the Alaska Venture Capital Group.

If successful, East Mikkelsen would be developed jointly with the existing unit.

Humble Oil drilled East Mikkelsen No. 1 to a total depth of 15,205 feet and encountered hydrocarbons in the Killian sandstone interval of the Canning formation between 11,516 feet and 11,572 feet measured depth. A five-hour test collected 39 barrels of 24 degree API oil from the well bore, correlating to approximately 180 barrels of oil per day.

Smaller expansion

In its application last November (2012), Savant said the seven leases would “connect subsurface potential and surface infrastructure” for the two companies. By combining the leases into a single unit, “drilling targets could be reached more easily and development could occur more efficiently and safely with less environmental impact on the area.”

But the state determined that only portions of two leases met the criteria for unitization.

ADL 391001 and ADL 390825 were set to expire on Jan. 31 and Feb. 29, 2012, respectively, but were extended by unitization proceedings. Now, the un-unitized portion of ADL 391001 is called ADL 392392 and extended to Jan. 31, 2014, and the un-unitized portion of ADL 390825 is called ADL 392393 and extended to March 1, 2014.

All six Alaska Venture Capital Group leases are also still pending to be included in the proposed Telemark unit, which the state said it plans to address in a separate decision.

A new phase for Badami

Savant Alaska and ASRC Exploration joined the project in late 2008, eventually bringing the field back into sustained production by drilling and hydraulically fracturing additional horizontal wells to boost production.

Savant became the operator in late 2011.

As of January 2013, the Badami unit had produced slightly more than 6 million barrels of oil and 30 billion cubic feet of natural gas. The five wells in the Badami field were producing 214 barrels of oil and 27,000 cubic feet of natural gas as of January 2013.

Among those was the Badami B1-38 well Savant drilled in 2009, completed in early 2010 and brought online in late 2010.

—ERIC LIDJI

Editor’s note: A 2014 update in the division’s Jan. 22, 2021, decision said the agency’s previous decision severed ADL 390825 and assigned the non-unitized portion of that lease to ADL 392393 — that lease was extended to Feb. 29, 2014. Similarly, the previous decision severed ADL 391001 and assigned the non-unitized portion of that lease to ADL 392392 — that lease was set to expire on Jan. 31, 2014. Because the director’s decision was appealed, neither lease 390825 nor 391001 were severed; nor were the non-unitized portions of those leases assigned to leases 392393 and 392392, respectively.

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