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Explorers 2011: Repsol takes a big bite out of Alaska Spanish major planning 15-well North Slope, Beaufort program via partnership with Armstrong, GMT Eric Lidji For Petroleum News
Almost overnight, Repsol YPF, S.A. went from being a leaseholder without any definite exploration plans for Alaska to one of the most active exploration companies in the state.
The Spanish major held federal leases in both the Beaufort and Chukchi seas for years, but didn’t capture the attention of state policymakers until March 2011, when it launched a $768 million exploration program across 494,211 acres of state land and water.
Repsol is partnering on the program with 70 & 148 LLC, a subsidiary of Denver-based Armstrong Oil & Gas, the independent responsible for bringing Pioneer Natural Resources and Eni Petroleum to Alaska. GMT Exploration Co. LLC is also a partner on the program. Through the deal, Repsol picked up a 70 percent interest in 157 leases.
Repsol said it planned to conduct “a broad-reaching exploration and development program” that involved “collaborating on all aspects of the program” with 70 & 148 LLC. The vast majority of the $768 million transaction cost — perhaps as much as $750 million — will go toward actual exploration, according to Petroleum News sources.
This winter, Repsol plans to run five rigs and drill 15 wells, one of the most ambitious single season exploration programs undertaken anywhere in Alaska in recent history.
“This deal is a perfect fit in our efforts to balance our exploration portfolio with lower risk, onshore oil opportunities in a stable environment,” Repsol Chairman Antonio Brufau said in March. “We are confident that our worldwide experience combined with a partner with an extensive local knowledge is going to deliver value in the near future.”
Starting offshore, now onshore Repsol traces its lineage to a state-owned petroleum industry monopoly created before the Spanish Civil War and reorganized often in the following decades. Repsol became a private company in the late 1980s and gradually expanded internationally, buying the Argentinean company YPF in 1999 and establishing a vast Latin American portfolio.
In the past decade, Repsol made liquefied natural gas a major segment of its portfolio, while expanding in North and South America, the Caribbean, Europe, Russia and Africa.
With some 40,000 employees working in more than 30 countries, Repsol is currently one of the 10 largest private oil companies in the world. The company earned 4.7 billion euros of income in 2010 (around $6.5 billion) up from 1.5 billion euros in 2009 (around $2 billion).
Repsol first arrived in Alaska through two partnerships in the outer continental shelf Beaufort Sea. Although it did not bid in sale 195 or 202, Repsol later acquired a 20 percent interest in acreage held by Shell (40 percent) and Eni (40 percent), and a 20 percent interest in acreage held by Eni (80 percent) leased during those federal sales.
In February 2008, Repsol made $14.4 million in high bids on 93 blocks in sale 193 in the Chukchi Sea. Although the company hasn’t made any official plans for that acreage, Petroleum News sources have suggested Repsol might be interested in partnering with Shell, Eni and/or Statoil. None of those companies, though, have confirmed those rumors.
“The North Slope of Alaska is an especially promising area for Repsol as it has already shown to be oil-rich and carries low exploratory risk. This acreage also helps increase the company’s presence in OECD countries,” the company wrote in a press release in March, adding, “Repsol has significantly boosted its onshore and offshore exploration activities in the last five years, resulting in some of the world’s largest oil and gas discoveries.”
Using five rigs for program The acreage Repsol acquired in March is clustered in three general areas: south of the Kuparuk River unit, in the White Hills region and near the offshore Oooguruk unit.
Repsol plans to build five ice pads this winter and drill a vertical well and two sidetracks from each pad. The wells would range in measured depth from 12,000 to 16,000 feet.
The five proposed drilling locations would run down the fairway between the Colville River unit to the west and the Oooguruk and Kuparuk River units to the east.
Repsol is planning a vertical well and as many as two sidetracks at each location:
*Qugruk No. 1 would be in the Colville River Delta near ARCO Kuukpik No. 3 and Gulf Colville Delta State No. 1. Repsol plans to drill the well using the Nabors rig 2ES.
*Qugruk No. 2 would be about five miles east of Qugruk No. 1. Repsol plans to drill the well using the Doyon Arctic Fox, a lightweight truckable rig that Pioneer Natural Resources Alaska Inc. first used at the NE Storm and Cronus units in 2006 and Anadarko Petroleum Corp. later used to drill two wells at its Gubik Complex in early 2009.
*Qugruk No. 3 would be about five miles south of Qugruk No. 1 and five miles west of the ConocoPhillips’ Placer wells. Repsol plans to drill the well using Nabors rig 105AC.
*Qugruk No. 4 would be an offshore well several miles off the northern coast of the Colville River unit. Repsol plans to drill the well using Nabors 106AC.
*Kachemach No. 1 would be farther south, just east of the Meltwater participating area of the Kuparuk River unit. The proposed site is about five miles southwest of the Chevron Ruby St. No. 1 well and five miles northwest of the BP Exploration (Alaska) Narvaq No. 1 well, and near several of the Union Oil Co. of California White Hills wells.
Repsol plans to drill Kachemach No. 1 using Nabors rig 9ES, the rig that Brooks Range Petroleum Corp. used earlier this year to drill North Tarn No. 1 several miles to the west.
The region is what is known as the “billion-dollar fairway,” a rich, not fully explored, north-south trending long rectangle with a western edge a few miles inside NPR-A and an eastern boundary reaching the Kuparuk and Tarn oil fields. The fairway extends north to south from the near-shore Beaufort Sea to an area several miles south of Tarn. The Alpine oil field and its satellites lie inside the fairway.
Repsol is already preparing for that drilling program, although it continues to work with the North Slope Borough on permitting and with residents of the Colville Delta region to be sure it is doing what is necessary to conduct a safe exploration campaign.
The company conducted fieldwork this summer to define the route and location of the ice roads and pads it plans to build this winter and to indentify water sources for that construction. The company planned to begin monitoring soil temperatures along the route this September using thermistor strings and will pre-pack the roads in November and December.
Once temperatures permit in December and January, Repsol plans to build 30 miles of onshore ice roads and 30 miles of offshore ice roads. The company will also build seven ice pads, two near Drill Sites 3S and 2P in the Kuparuk River unit for staging, and five — four onshore and one offshore — for a 15-well drilling campaign. Repsol plans to drill “at least” one vertical well and, “time permitting,” up to two sidetracks from each pad.
The staging pad near Drill Site 2P will be about 600 feet by 600 feet and used to support the southernmost drilling site. With Drill Site 2P located along existing all season roads that connect to the Dalton Highway. The pad will house a 40 to 60-man camp.
The staging pad near Drill Site 3S will be about 600 feet by 1,200 feet and used to support the four northern drilling locations. The site is also connected to existing all-season roads. The pad will house a 120-man camp. Repsol said it “may share some of the staging capabilities with another operator in the area,” but offered no further details.
The four onshore drilling pads will be about 500 feet by 500 feet, but could be expanded to 600 feet by 600 feet “if needed.” The offshore drilling pad will be larger with additional design elements to accommodate the harsh conditions of Arctic coastal waters.
The company expects to begin demobilization and clean up in April or May.
Another stab at White Hills Although the company is focused on the Colville River Delta this winter, the Kachemach No. 1 well shows that Repsol is interested in the beguiling White Hills prospect.
The White Hills region is onshore, close to the trans-Alaska oil pipeline and recently explored. Chevron drilled five shallow wells across the large play in 2008 and 2009.
Although Chevron never released results, the State of Alaska believes the region is both oil and gas prone, and recently released Alaska Oil and Gas Conservation Commission well logs suggest Chevron was targeting oil and gas prospects in the Brookian formation.
Although some of the acreage Repsol acquired in the March is prospective for shale source rock, Repsol appears to be only interested in conventional oil plays for now.
GMT starting out on Slope While 70 & 148 parent company Armstrong is well known in Alaska, the other partner in the program, GMT Exploration, is a relative newcomer without much history in the state.
Although the company arrived in Alaska as a minority partner of Armstrong on the North Fork unit in the southern Kenai Peninsula, Denver-based GMT first acquired its own acreage in 2010. The company picked up 10 leases in three spots in the Beaufort Sea area wide sale in February: on the northern edge of the Oooguruk unit, north of the National Petroleum Reserve-Alaska and north of a block of ConocoPhillips/Anadarko acreage west of the Colville River unit. GMT grabbed more acreage in the North Slope areawide sale that October, picking up eight leases that extended its existing block to the west.
GMT Exploration began as an offshoot of GMT Capital Corp., a Georgia investment firm founded in the 1990s. GMT Exploration is currently based out of Denver, and while it has common shareholders with GMT Capital, it is run independently.
GMT maintains a small natural gas production base in Alaska through its 20-30 percent stake in the leases at North Fork and holds 37,825 net acres in State of Alaska leases.
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