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THE EXPLORERS 2004: Production in a box Armstrong’s production and processing facilities keep oil contained, reduce North Slope costs Kristen Nelson Petroleum News
Smoother, faster, better, cheaper is Armstrong Oil and Gas’s mantra.
“Smoother, faster, better, cheater: everyday that’s what we try to do; without that we think the competition will go by us,” Stu Gustafson told the Alaska Support Industry Alliance Oct. 28 in Anchorage.
Gustafson, Armstrong’s vice president of operations, spoke both to the Alaska Chapter of the International Association of Drilling Contractors and the Alliance the week of Oct. 25, 2004, updating Anchorage audiences on the company’s three-year history in Alaska, and on its plans for drilling with Kerr-McGee this winter in the Nikaitchuq and Tuvaaq units in the shallow waters of the Beaufort Sea, and for Armstrong’s own plans for its onshore Two-Bit prospect, just off the western edge of the Kuparuk River unit.
Two of the Nikaitchuq wells this winter, operated by Kerr-McGee, will be “long-term production tests,” Gustafson said. Kerr-McGee will also drill an extended reach well, and if farm-out arrangements are completed with ConocoPhillips, a fourth well will also be drilled in this area.
At Two-Bits, the Armstrong prospect west of Kuparuk, “we’ll drill two exploratory wells over this winter. It’s two prospects,” Gustafson said, and if one of those prospects proves up, “we will start production drilling and we will be online by year end (2005).”
Armstrong would get Two-Bits on line quickly with an idea Gustafson developed when faced with North Slope Native concerns about offshore production. They don’t want to see a single drop of oil in the water, he said.
The solution started on a napkin in the Brower Cafeteria in Barrow, Gustafson said: Put all of the facilities inside a tank, a containment vessel, so that if there is a leak the leak is contained. This production-in-a-box plan has been refined by ASRC Energy Services, Gustafson said, but basically conductor pipe is put through the floor of the tank, wellhead and piping is inside and it’s monitored from offsite by cameras and heat sensors inside the tanks. The concept has been embraced by Kerr-McGee, Gustafson said, and variations on the idea are being looked at by Pioneer Natural Resources. Armstrong brought in Pioneer and Kerr-McGee as operating partners on Beaufort Sea prospects it assembled.
Environmental solution also solves some cost issues Gustafson said that while production in a tank began as a response to an environmental concern — keeping oil contained — it is proving economic, with drill site costs estimated at $12 million for a 12-well site, compared to $29 million for a conventional North Slope facility. Armstrong is also planning to bring in modular processing facilities and process oil on site. These are skid-mounted production units and truckable he said. Two-Bits would use “no unit power, no unit processing, we do it ourselves, all the way to the LACT (lease automatic custody transfer) meter.”
And to move the oil Armstrong is looking at the type of fluid transport line used in the Gulf of Mexico. The flexible pipe comes in 3,200-foot rolls, he said, and would be laid pipe-within-a pipe inside an outer pipe, and buried in the road.
What’s next? Armstrong picked up some 115,000 acres of state oil and gas leases Oct. 27. It first bid on state leases in 2001, brought in a partner (Pioneer), and was drilling within seven months of lease issuance, completing three wells offshore in one season, a single-company record, Gustafson said. In 2003, Armstrong doubled its acreage, brought in Kerr-McGee and drilled two wells in 2004.
“We buy prospects … to drill,” he said. We have brought in Pioneer and we have brought in Kerr-McGee, Gustafson said, and “we’re working on other options.”
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