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EXPLORERS USA 2005: Kerr-McGee: Turning risk into reward on Alaska’s North Slope
Kerr-McGee is two-for-two in Alaska. Close to finishing its second successful North Slope drilling season, the Oklahoma City-based independent said March 15, 2005, that results from an offshore appraisal well in its Nikaitchuq exploration unit “were encouraging.”
The company said it has tested the Schrader Bluff reservoir at its Nikaitchuq No. 4 horizontal appraisal well and that the well came in at rates of up to 1,200 barrels per day during periods of the initial test, with the oil testing at 16 to 17 degrees API. The Nikaitchuq unit is in the shallow waters of the Beaufort Sea offshore the Kuparuk River and Milne Point production units.
Although they not made a formal development announcement yet, on March 31, 2005, Kerr-McGee and partner Armstrong Alaska, a subsidiary of Denver-based Armstrong Oil and Gas, presented their proposed “master plan” for Nikaitchuq development to the North Slope Borough, which has jurisdiction over all of northern Alaska.
The companies told the borough they are looking at building a production pad at Oliktok Point and up to three offshore gravel islands inside the barrier islands in the vicinity of Spy Island in water depths of eight feet or less. They would drill up to “50 wells at each offshore location and about 20 wells at the onshore location for producing oil and gas.”
In their design of the proposed development, the companies placed special emphasis on “command, control and containment for spill response” using a “pipe in pipe” design to provide protection for the three-phase produced fluid lines and an interstitial space for pipeline leak detection. Wellhead containment modules would be used for its production islands that would have remote leak detection and recovery systems.
Pipelines would be run inside of a larger conductor pipe to enhance containment between the island and production pads as three-phase flow. The remaining lines would either be placed in the same or separate conductor pipe (diesel line) or attached to the outside of the conductor pipe,” Kerr-McGee and Armstrong said in their presentation paperwork to the borough.
The conductor pipe and any attached lines and cables would be placed in a trench below the seafloor.
Trenching operation would be conducted from February to April from the sea ice.
Processed crude would be shipped through a gathering line to either the Kuparuk unit 3R pad or the Kuparuk pipeline for transport to the trans-Alaska oil pipeline. In production by April 2007 The companies told borough officials that completion of preliminary engineering studies, including pipeline route surveys, was expected by May.
“Partial production of oil” from the Oliktok pad was expected to begin in later this year if Kerr-McGee, a 70 percent partner, and Armstrong, a 30 percent partner, sanctioned the project and had all their permits in place.
Construction of the offshore islands and onshore pad would begin in early 2006.
“Pipeline placement and completion of installation of processing facility” was also scheduled for 2006.
Under the proposed schedule Kerr-McGee and Armstrong said the project should be in full operation in April 2007.
Drilling onshore and offshore would continue “for at least two to three years.”
At the completion of drilling operations the offshore islands would be unmanned. ConocoPhillips producing Schrader Bluff The viscous Schrader Bluff formation, called West Sak at Kuparuk, is under production at three fields onshore: the ConocoPhillips Alaska-operated Kuparuk River field and the BP Exploration (Alaska)-operated Milne Point and Prudhoe Bay fields. Both BP and ConocoPhillips have recently begun large-scale Schrader Bluff-West Sak developments using horizontal wells.
Kerr-McGee said March 15 that it also encountered the same Schrader Bluff interval at the Tuvaaq exploration well, some three miles to the west of Nikaitchuq No. 4, in the adjacent unit.
Kerr-McGee has an 82 percent working interest in Tuvaaq with Armstrong holding the remaining interest. Kigun in Kuparuk River unit Based on the results of drilling, Kerr-McGee said on March 15, 2005, that it is drilling a sidetrack, the Kigun well, to earn additional acreage.
The Kigun target is on ADL 355024, which is part of the ConocoPhillips Alaska-operated Kuparuk River unit. Kerr-McGee will operate Kigun with a 55 percent working interest upon completion of the drilling operations.
Kerr-McGee did not say if the prospect would remain in the Kuparuk River unit if the well proves successful.
“We are encouraged with the results we’ve seen thus far in Alaska,” Dave Hager, Kerr-McGee’s senior vice president responsible for oil and gas exploration and production, said. “Although we still need to complete the appraisal program, based on initial evaluation, it appears the Schrader Bluff interval might be developed throughout much of our 36,000 acres in the Nikaitchuq and Tuvaaq area.”
Hager, speaking at the A.G. Edwards’ Energy Conference in Boston March 15, said the company is targeting two reservoirs, the shallower Schrader Bluff and the deeper Sag River. The second horizontal appraisal well, the Nikaitchuq, is testing the Sag River formation; slides accompanying Hager’s remarks described the No. 3 well as drilling a new fault block. “We did test the Sag River at one of our vertical wells last drilling season at a rate of 960 barrels a day, 38 degree API,” he said. (The Nikaitchuq No. 2 was drilled 9,000 feet southeast of the discovery well and successfully extended the accumulation down dip.) “What we want to see now is what will it do out of a horizontal well.”
Results from the Tuvaaq well, Hager said, prove “the existence of the Schrader Bluff formation, the shallower formation, three miles to the west of Nikaitchuq.” The Kigun prospect, he said, is being drilled to earn that acreage.
Onshore, he said, the Schrader Bluff is being developed on 160-acre spacing, and with “approximately 36,000 acres gross … I think you can see the potential that exists with this particular program.” One of the slides accompanying Hager’s remarks showed a resource of 30 million to 60 million barrels for Kerr-McGee’s share of its Alaska discoveries now being appraised. The numbers presumably do not include acreage not yet earned by Kerr-McGee or the portion of the resource owned by other companies.
“We either make a decision to move forward (with Nikaitchuq development) after this year’s drilling season or not,” Kerr-McGee Alaska Operations Manager Todd Durkee said in 2004. Ataruq on the agenda Earlier in 2005, Kerr-McGee acquired a 50 percent working interest in the Ataruq prospect onshore Alaska and is the operator. Kerr-McGee said it plans to drill the initial Ataruq exploration well following the Nikaitchuq appraisal drilling. A second well will be drilled in the 2005 drilling season, depending on the results of the first well.
Hager said that once drilling is finished at Nikaitchuq, Kerr-McGee will drill an exploration well at the Ataruq prospect onshore. Ataruq, another prospect Armstrong assembled (and called “Two Bits”), is on the western edge of the Kuparuk River unit and south of the Nikaitchuq field.
“They’re going to test the Kuparuk C and the Tarn formations,” Hager said.
The slide accompanying Hager’s remarks described Ataruq as a potential extension of Kuparuk and Palm fields.
If the prospect proves commercial, “we will start production drilling” and begin production by late 2005 from standalone modular facilities, an Armstrong executive said in October 2004.
Initial production from the project was expected to be approximately 15,000 barrels per day. According to the plan of operations Armstrong filed with the state of Alaska, as many as 20 wells might eventually be drilled as part of the development.
Ataruq or Nikaitchuq, whichever starts pumping oil first, would be the first independent-operated production on Alaska’s North Slope.
—Kay Cashman & Kristen Nelson
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