Donkel exploration plan

Includes new Trump #1 well next to Challenge Island well, modifications

Kay Cashman

Petroleum News

Donkel Oil and Gas submitted a plan of exploration, or POE, for the Greater Point Thomson unit, or GPTU, as part of its application to form the unit (see related stories in last week's Petroleum News).

The GPTU was recently conditionally approved by the Alaska Department of Natural Resources' Division of Oil and Gas.

In its POE, operator Donkel proposed to do the following:

In the first year, continue to pursue existing Point Thomson unit, or PTU, 3D seismic data and relevant 2D data; evaluate Neocomian sand play for drilling and development options; coordinate with Qilak LNG on gas supply needs; collaborate with the Alaska Industrial Development and Export Authority, or AIDEA, on Arctic National Wildlife Refuge, or ANWR, lease development near the GPTU as well as complete preliminary work on rock properties modeling and initiate a feasibility study for drilling and testing three additional wells and initiate a feasibility study for a 3D seismic shoot over GPTU and AIDEA leases.

In the second year, Donkel committed to evaluate Eocene and Cambrian sand reservoirs for drilling and development options; continue coordination with Qilak; collaborate with AIDEA on ANWR lease development near GPTU; discuss facility-sharing options with the PTU operator (Hilcorp) and integrate new geophysical data to improve reservoir understanding.

In the third year, Donkel committed to prepare to drill the first GPTU well (Trump #1) from an onshore pad through the Thomson Sands; continue permitting and planning for the first delineation well; continue to collaborate with the PTU operator on facility sharing; and conduct studies to refine seismic stratigraphy and identify new prospects.

In the fourth year Donkel committed to update key horizons; begin seismic attribute analysis; continue well planning and permitting for winter drilling; and initiate proposed delineation well with anticipated drilling date in February at end of the fourth year following approval or beginning of fifth year following unit approval depending on the date of approval.

In the fifth year, Donkel committed to initiate activities to bring the delineation well into production; update mapped horizons; continue seismic attribute analysis; gather and analyze data from the delineation well; perform economic analysis; calculate resource assessment, as well as build a 3D geologic model based on well results.

Per the division, Dunkel's POE couldn't be approved for these reasons.

First, the POE did not comply with a state statute requiring a plan to promote conservation of all natural resources, including all or part of an oil or gas pool, field, or like area.

Second, the proposed POE didn't promote the prevention of economic and physical waste.

Third, the POE did not provide for the protection of all parties of interest, including the state of Alaska.

Although the proposed POE states that the applicant will "prepare" drilling a single well -- the Challenge Island Trump #1 on the western portion of the GPTU -- this event won't occur until the third year of the five-year unit and POE term. Further, the proposed POE refers to the initiation of a proposed delineation well "with anticipated drilling date" in February at end of the fourth year following approval or beginning of fifth year following unit approval depending on the date of approval The division determined the foregoing activities did not represent firm well drilling commitments.

The division also said the proposed five-year POE didn't include definitive plans to evaluate or explore the eastern acreage. Instead of focusing on and committing to operations like drilling and development, the POE focuses on subjects like additional geophysical and geological studies and collaboration with other state agencies on ANWR lease development (e.g., marketing) "near" the proposed GPTU.

In sum, and despite the applicant's near decade-long possession of the leases that qualify for unitization, the division determined that Donkel failed to show a determined commitment to developing the resources that potentially underlie the leases.

However, the proposed POE provides that if the proposed unit plan of exploration is disapproved, DNR will propose modifications which, if accepted by Donkel, would qualify the plan for approval. Accordingly, the division proposed the following modifications:

Drill one exploration well in the western acreage within year five to delineate the resource in that area; and drill one exploration well in the eastern acreage within year five to delineate the resource in that area.

The division assigned no preference to the order in which the two exploration wells are drilled, providing that one is drilled within the western acreage and the other within the eastern acreage.