Talisman’s FEX high on Alaska

In a July 28 conference call, Talisman Energy executives said the Calgary-based independent would be drilling two exploration wells in the National Petroleum Reserve-Alaska this coming winter, as opposed to a single well previously mentioned by company executives.

The NPR-A wells will be drilled in the Northwest Planning Area by Talisman’s wholly owned subsidiary Fortuna Exploration LLC, which has changed its name to FEX L.P.

In a newsletter distributed to residents of the North Slope Borough prior to recent community meetings, FEX said the two wells are part of a three-year winter exploration program during 2005, 2006 and 2007 in which “a total of two to three drill site ice pads will be constructed per year” east and north of the village of Atqasuk and southeast of Barrow (see map) on the company’s 250,069 acres in Northwest NPR-A.

FEX has staked a total of eight wells in the area with the U.S. Bureau of Land Management and initiated permitting but, as is the norm with staking, not all eight wells will necessarily be drilled, Tim England told Petroleum News Aug. 2. England is senior manager, exploration, for FEX.

Talisman Exploration Executive Vice President John ‘t Hart, to whom England reports, said in the conference call that FEX is “looking at very big numbers” from its 443,000-acre interests in and offshore the petroleum reserve — on the order of 250 million barrels of oil equivalent per prospect — with the potential to exceed 1 billion boe from something he referred to as “the structure” within the northwest area being drilled this winter. Because of the remoteness of Alaska, he said “we are going for a big prize, bigger than we have ever drilled.”

England said the volumes of oil quoted by ‘t Hart were upside volumes. “We recognize there are gas risks in this area (the risk of finding natural gas instead of oil), the risk of not having productive reservoirs and the risk of spending a lot of money and not finding anything at all.”

Having said that, England said FEX had “identified several prospects in the NPR-A” and is “quite bullish on the areas.”

Working with competitors possibility

FEX’s 22 leases were part of a single block of 65 leases sold at the first (and only to date) BLM Northwest NPR-A lease sale. The block begins at Smith Bay in the Beaufort Sea and runs along the boundary between the northeast and northwest NPR-A planning areas, and extends to the southwest. FEX’s 22 leases include a band near the top of this lease block and leases trending down to the southern edge of the block. Petro-Canada took 18 leases in this block, three on the eastern edge, eight running through the middle of the block and the remainder on the western edge.

The eight tracts ConocoPhillips bid on by itself are in the upper half of this block. Five of the ConocoPhillips-Anadarko-Pioneer partnership tracts are in this block, one to the north, one to the east and three on the southern edge. Twelve of the ConocoPhillips-Pioneer tracts are on the northern and southern edges of the block.

“We’d prefer to work with the other companies in the areas we have leases to make the exploration process more efficient,” England said, declining to mention if there were any deals in the works. “It’s a remote area, so it makes more sense.”

England said FEX has contracted with Lynx Enterprises, part of ASRC Energy Services, to handle its permitting. ASRC Energy Services is a subsidiary of Arctic Slope Regional Corp., the Alaska Native regional corporation for northern Alaska.

“We plan to mobilize a drilling rig (Nabors Alaska drilling rig 14E) out to a staging area (Cape Simpson) this summer. The embarkation point is West Dock in PBU (Prudhoe Bay unit). We’re putting the rig and supplies on for next year’s drilling and barging it all out … during the open-water barging season. We’re gearing up for that exercise this month,” he said.

FEX has put together a Conflict Avoidance Agreement for barging to and from Cape Simpson with the Alaska Eskimo Whaling Commission.

The drilling rig and support equipment will be returned to Cape Simpson between drilling seasons. FEX said it was working closely with the local people of the North Slope through entities such as AEWC, the North Slope Borough and the Inupiat Community of the Arctic Slope.

“FEX has received a warm welcome to Alaska by federal and state authorities, and we look forward to working successfully with regulators and the local communities” England said.

‘t Hart and Talisman CEO Jim Buckee said that even if an NPR-A discovery is made it will take another year to appraise the find and at least four to five years before oil could flow to market.

—Kay Cashman & Gary Park