Providing coverage of Alaska and northern Canada's oil and gas industry
October 2019

Vol. 24, No.41 Week of October 13, 2019

Securing Nicolai Creek

Amaroq says three factors critical to onshore Cook Inlet unit’s long-term survival

Kay Cashman

Petroleum News

If approved by the state, the 46th annual plan of development for the Nicolai Creek unit that Amaroq Resources LLC filed with the Alaska Department of Natural Resources’ Division of Oil and Gas on Oct. 1 will be in effect from Jan. 1 through Dec. 31, 2020. In the proposed plan of development, or POD, the company says long range production of the onshore natural gas field on the west side of Cook Inlet is “highly dependent” on the following factors:

1. The ability to economically dispose of produced water. Absent a water disposal solution, the field becomes uneconomic in “short order,” operator Amaroq said in the POD. The company is in the process of conducting an injectivity test on NCU No. 1B well in preparation for the filing of a disposal injection order application with the Alaska Oil and Gas Conservation Commission, the purpose of which will be to convert the depleted gas well to a produced water disposal well.

2. The outcome of Amaroq’s motion for reconsideration in the AOGCC matter of increased bonding requirements. Amaroq says if it has to post a $2.4 million bond with AOGCC pursuant to the agency’s newly established requirements, the Nicolai Creek field “immediately becomes uneconomic and is likely destined for cessation of operations.” A hearing on the motion has not yet been set.

3. The ability of Amaroq to attract the additional capital necessary to effectively further develop the unit, which has “tremendous upside potential” for natural gas and conventional oil, unconventional gas and storage development, per the company. If Amaroq is successful in attracting the investment dollars to pursue “any or all of these upsides,” the Nicolai Creek field would likely remain in operation for years to come.

Unit production

Amaroq said the Nicolai Creek unit produced 145,486 mcf from Sept. 1, 2018, through Aug. 31.

Thanks to well work and surface facility improvements, gas production from the field has recently doubled, Scott Pfoff, president of Amaroq, told Petroleum News on Aug. 30.

“We’ve gone from about 250,000 cubic feet (per day) to 500,000 cubic feet (per day),” Pfoff said.

One issue involved fine sand passing through screens designed for sand capture, a problem that necessitated improvements to the sand handling capabilities of the surface facilities, he said.

Since its acquisition of the Nicolai Creek field in January 2018, Amaroq has pursued a program of field maintenance and well workovers, rather than drilling new development wells. That strategy continues, with the company focusing on achieving good performance from the field’s existing wells, Pfoff said.

In its Oct. 1 filing with the state the company said it has no development or drilling plans for the unit during the 46th POD timeframe.

Under well data in the POD, Amaroq indicated it has six producer wells - NCU 1B, 2, 3, 9, 10 and 11 - although not all the wells are currently in production.

Wells that were abandoned by previous operators include NCU 4, 5, 6, 13 and 14.

Status of producers

Amaroq said the NCU No. 1B producer, which it would like to convert to a water disposal well, was directionally drilled by a previous operator as a sidetrack to NCU No. 1 well in 2002 into state of Alaska lease ADL 17585. It won’t be much of a loss as a producer because the well only produced 5,414 mcf between Sept. 1, 2018, through Aug. 31 of this year.

Per the POD, slickline was run in NCU No. 2 well in August 2018 to ascertain well bore conditions and evaluate potential for future production and/or gas storage. Mechanical issues in the well were identified but no further work was performed and the well remained shut in and will likely require rig intervention to correct the issues, Amaroq said in the POD.

Per the company NCU No. 3 well was shut in due to formation sand and silt plugging. It will require 1.25-inch coiled tubing for the cleanout, which was not readily available in the Cook Inlet area, so there was no output from the well between Sept. 1, 2018, through Aug. 31.

The NCU No. 9 well produced 93,333 mcf from Sept. 1, 2018, through Aug. 31. Amaroq said the well has been on production with no intervention since a coiled tubing cleanout was successfully performed in the third quarter of 2018.

As for producer NCU No. 10, it produced 1,556 mcf between Sept. 1, 2018, through Aug. 31.

A coiled tubing cleanout and chemical sand control of the Carya 2-4.2 completion was attempted during third quarter 2018. However, as a result of parted tubing, the procedure was “unable to be completed.” Attempts to put the well back on production subsequent to the coiled tubing work proved unsuccessful due to excessive water and sand production, Amaroq said.

NCU No. 10 was shut in until a series of downhole sand screens were installed with slickline in the first quarter of this year but attempts to produce the well “were again unsuccessful due to excessive water and sand production. The well was shut in again until the third quarter at which time enhanced surface equipment modifications were made and the well was put back into production,” Amaroq said in the POD.

Production was stabilized but due to the lack of water disposal options, the well was currently shut in pending conversion of NCU No 1 B to disposal, per the POD.

The company also said it would continue evaluating the economics associated with a gravel pack and/or rig workover during 2020 for NCU No.10, “which would facilitate production at much higher rates.”

The sixth producer, NCU No. 11, yielded 45,183 mcf between Sept. 1, 2018, through Aug. 31.

A coiled tubing cleanout of the well was successfully performed in third quarter 2018, which resulted in increased output for a time, but “as a result of a steep decline in production, slick line work was performed to remove sand from the tubing” in the third quarter of this year and the well was recently put back into production and “is in the process of stabilizing to rates observed pre-wireline,” Amaroq told the state in the POD.

More on upsides

Although, at this time Amaroq has no plans for exploration outside the Nicolai Creek field, there is potential to extend the existing field, Pfoff said in the Aug. 30 interview.

As partly referenced in the third factor critical to long-term production of Nicolai Creek, the company is also interested in developing oil and gas pools at deeper levels below the field. Currently, rights to those deeper prospects belong to Apache Alaska Corp., which acquired 3D seismic over the acreage in early 2012.

Pfoff acknowledged the potential to drill an additional production well, the Nicolai Creek No. 12 well, targeting deeper sands in the Beluga and Upper Tyonek formations to the north of the current production area. The previous operator, Aurora Gas, had conducted an evaluation of the potential of this well.

However, Amaroq does not want to tackle it until the company has dealt with achieving good performance from the field’s existing wells, Pfoff said.

Market healthy

Pfoff sees the Cook Inlet gas market as relatively healthy.

“Right now, the way I see it, I can increase production quite a bit at Nicolai Creek and not have any trouble selling the gas at a good price,” he said.

Using the current wells and well completions the field probably has a remaining four to five-year life, Pfoff said. But, with much upside possible, if successfully developed, field life could be considerably extended, he said.

Pfoff expressed satisfaction with the progress that his company has made in saving the Nicolai Creek field from closure.

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