Doyon eyeing winter seismic in Nenana

Shoot would gather information about the less well-known northern end of the Interior basin, follow up on 2009 exploration well

Eric Lidji

For Petroleum News

Doyon Ltd. is looking to gather seismic data in the Nenana Basin next winter.

The Alaska Native corporation for the Interior wants to follow up on a 2009 exploration well it drilled in a region 50 miles southwest of Fairbanks believed to be gas prone.

The seismic program intended for the winter of 2010-11 would gather information about the northern end of basin, the most under-examined section of the prospect.

“Other than a few gravity measurements at the northern end of the basin, there really isn’t any exploration,” said Jim Mery, Doyon’s vice president for lands and natural resources.

A winter seismic shoot could help the companies avoid some potential obstacles present in the Minto Flats Game Refuge, where the prospect is located. Waterways would be frozen, soggy ground would be covered in snow and wildlife would be scarcer.

“When things are frozen it’s just much easier to gather data,” Mery said.

Doyon recently completed a similar winter seismic program in the Yukon Flats area around Steven’s Village using helicopters. Mery said the Nenana project might mix air and ground transportation, but acknowledged that permitting would be stricter.

“There would be an extra level of scrutiny on anything we did, even though one of the purposes of that refuge is hydrocarbon development,” Mery said about Minto Flats.

Mery said Doyon still needed to formally pitch the idea of a seismic program to its partners in the venture, but he added, “We are prepared to proceed without them.”

Unknown part of the prospect

Denver-based independent Rampart Energy, on behalf of the five-company partnership, drilled the Nunivak No. 1 well in the Nenana Basin in early July 2009. The well, which the company plugged and abandoned in August, sat about five miles west of Nenana.

Nunivak No. 1 is the third well drilled in the region, but differs significantly from the previous two. In 1962 Union Oil Co. of California drilled the Nenana No. 1 well to about 3,000 feet, while in 1984 ARCO drilled the Totek Hills No. 1 well to about 3,600 feet. By comparison, Rampart drilled Nunivak No. 1 to about 11,100 feet.

The previous wells were outside the current exploration area. Nenana No. 1 was some 10 miles west of Nunivak No. 1 and Totek Hills No. 1 was some 20 miles to the southwest.

Rampart drilled the well on Alaska Mental Health Trust land using the Doyon Drilling Arctic Wolf No. 2 rig, in partnership with Doyon, Usibelli Energy and Arctic Slope Regional Corp. and the newest partner, Minnesota independent Cedar Creek Oil and Gas.

The companies chose the location and depth of Nunivak No. 1 based on geologic clues, some gathered from a 2005 2-D seismic shoot over the southern end of the basin, suggesting a dome-like, three-way closure along the eastern side of the basin with a smaller 14,000-foot-deep southern section and a larger 20,000-foot-deep northern section.

“We’re working right in the middle of a saddle, which we think is a good place where gas could migrate from both source areas,” Jim Mery, vice president for lands and natural resources for Doyon, told Petroleum News last summer, during the drilling campaign.

Doyon has not released results from Nunivak No. 1, and the proposed seismic program doesn’t indicate success or failure. In April 2009, Jim Dodson of Rampart Energy told state lawmakers that while “it would be very disappointing to have a completely dry well,” it wouldn’t mean the end of the project. The companies, he said, would use any information gathered down hole to get a better sense of the architecture of the basin.

The partnership is watching the clock, though.

The drilling program is taking place under a state exploration license, a program created in 1990 to promote oil and gas exploration outside of the Cook Inlet basin and the North Slope.

The state issued a seven-year exploration license for the program in 2002, but extended the term to 10 years in 2008. The companies asked for additional time because they said a series of changes to the tax code brought uncertainty to the project and delayed drilling.

The companies now have until 2012 to complete exploration work and decide whether or not to convert all or some of the exploration license area into conventional state leases.

New risks have emerged

Doyon has said a discovery of 60 billion to 70 billion cubic feet could sustain a power plant in Nenana, while reserves between 100 bcf and 200 bcf would be enough to justify a pipeline into Fairbanks, where most households and businesses use heating oil. With a much larger find, Doyon could even ship gas down to Anchorage, or send propane to smaller villages in the west using the river system in northern Alaska.

Recent developments in the Railbelt power industry could impact those plans, though.

In late March, Golden Valley Electric Association, the electric cooperative for the Interior, signed a 15-year contract to buy liquefied natural gas from the North Slope. The deal is contingent on North Slope facilities being constructed, but if it comes to fruition, it could tie up some of what Doyon views as a primary market: Fairbanks light and heat.

“There always have been market risks to this project,” Mery said, noting that even before the GVEA contract, similar risks came from a major North Slope gas pipeline.

Another risk Doyon sees on the horizon is a proposal to unite the Railbelt electric utilities. Legislation debated heavily in the just finished session would have allowed the six utilities to pool their generation and transmission assets under a single corporation.

Mery said Doyon is concerned that the current legislation doesn’t contain provisions guaranteeing that independent power producers will be able to sell power into the grid.