A little more than a decade ago, Arctic Slope Regional Corp. decided to expand the scope of its resource-development business to include oil and gas exploration and production.
So the Alaska Native corporation for the North Slope region and a mainstay in the oil field services business created a new subsidiary called ASRC Exploration LLC. While many exploration companies begin by accumulating acreage through lease sales or acquisitions, ASRC Exploration started out looking for knowledge rather than for oil.
In March 2003, ASRC entered into a “mentoring” agreement with BP Exploration (Alaska) Inc. The agreement established “a framework for sharing data and technical knowledge,” including information on unit and near-unit oil and gas investment opportunities on the North Slope, the two companies told Petroleum News at the time.
The agreement signaled a shift in the development of the North Slope. Negotiations began in 1999, around the time ARCO Alaska was divesting its holdings in the region. Those conversations resumed around 2002, when BP decided it would no longer conduct frontier exploration in Alaska and would instead focus on its existing properties.
For BP, the arrangement created a way to explore and potentially develop prospects around its existing units that might not otherwise make the cut for funding at the corporate level. “This agreement is … hopefully going to provide an opportunity for a company like ASRC to invest where BP would choose not to,” former BP Exploration (Alaska) President Steve Marshall said at the time. For ASRC, the agreement promised to become a way to accelerate economic opportunities for its shareholders. “This agreement provides a critical next step in providing ASRC with access to the tools and knowledge we need to become a competitive, independent producer in Alaska,” former Arctic Slope Regional Corp. President and Chief Executive Officer Jacob Adams said in July 2003.
The Placer unitCurrently, ASRC Exploration’s biggest opportunity is at the Placer unit.
The prospect was among the first outcomes of the company’s mentoring agreement with BP. In early 2004, BP, Union Oil Company of California, ChevronTexaco and ExxonMobil partnered on an exploration venture at the western edge of the Kuparuk River unit led by operator ConocoPhillips. ASRC farmed in the BP acreage, gaining a 35 percent interest in the Placer No. 1 well that ConocoPhillips drilled in February 2004.
While ConocoPhillips initially seemed enthusiastic about Placer, and even drilled a second well in April 2004, the company eventually backed away from the project. The first well had encountered some 17 feet of hydrocarbon-bearing sands in the Kuparuk formation. The second delineated the Kuparuk C formation slightly to the northeast.
ASRC acquired the Placer prospect in a March 2006 lease sale and, after years of negotiation, acquired the Placer No. 1 well in June 2010. The company also spent a year negotiating a license over an earlier seismic survey of the region. By early 2011, the five-year leases were about to expire, leaving little time for exploration activities. ASRC asked the state to form the Placer unit over four state leases covering some 8,769 acres.
The original unit request included a four-year exploration program. The plan called for reprocessing existing seismic by the end of 2012 and either re-entering Placer No. 1 or drilling another exploration well by the end of June 2014. According to the company the original well “demonstrated that decent quality oil is present in a thin, but high quality reservoir in the Placer area” particularly in the Kuparuk C sand. The state was skeptical about the proposal, though. In May 2011 the company accelerated its work commitments by one year and shrunk the proposed size of the unit to focus specifically on Placer No. 1.
In September 2011, the state approved a 1,480-acre unit covering a portion of four leases.
After reprocessing the seismic information, ASRC asked the state to expand to unit to the originally requested boundaries. According to ASRC Exploration President Theresa Imm, the seismic showed that the prospect extended beyond the unit boundaries and potentially merged with the Brooks Range Petroleum Corp. Appaloosa prospect to the south.
Because Placer was proving to be “at best, only marginally large enough to develop,” a strategic development plan was crucial. The company also asked the state to extend its work commitments by a year because the company was having trouble securing a rig.
The state denied the request, saying that the company could proceed with exploration work without expanding the unit. The company appealed the decision in February 2013, saying that any well drilled within the smaller unit would be a “twin” of Placer No. 1.
With the additional time, ASRC believed it might be able to piggyback on other development opportunities within the “billion-dollar fairway” between the Kuparuk River unit and the Colville River unit, particularly a public private partnership to develop basic infrastructure to support Brooks Range Petroleum’s nearby Mustang prospect.
After the state met with officials from ASRC and Brooks Range Petroleum, who presented a “unified position” for Placer exploration, then-Alaska Department of Natural Resources Commissioner Dan Sullivan conditionally approved the expansion and the extension, requiring ASRC to post a $5.4 million bond to backstop its commitments.
In late 2013, Brooks Range Petroleum began permitting a two-well exploration program at Placer to get a head start on the upcoming season, should a joint plan materialize. After several months, though, the two parties were unable to agree to final terms for a deal.
By that time, in early 2014, the geography of the region had grown more complicated.
Brooks Range Petroleum asked the state to expand its Kachemach unit to include the Placer prospect. Repsol E&P USA Inc. wanted to form the Tapqaq unit nearby.
With those developments, “three lessees intend to drill multiple wells in adjacent leases which are already unitized, or proposed to be unitized, and those wells may be targeting the same potential reservoir or reservoirs,” then Natural Resources Commissioner Joe Balash wrote to Imm in March 2014. To avoid inefficient development, “I have decided to defer unit decisions in this area until the end of the drilling season,” Balash added.
Finally, in November 2014, under a new administration, the state approved an expansion of the Placer unit, requiring ASRC to post a $2.5 million performance bond by mid-January 2015 and meet a series of commitments culminating in a well by May 2016.
The state formally expanded the unit in March 2015, after ASRC met early conditions.
The Badami unitWhile ASRC was in the middle of its long ordeal over Placer, it also became involved in another BP property - the troublesome Badami unit on the eastern North Slope.
Conoco Inc. discovered the Badami oil pool in 1990, and BP brought the field into production in August 1998. But oil production peaked a month later and BP spent the next decade starting and stopping production in an effort to recharge field pressure.
In mid-2008, the state approved a plan where Savant Alaska LLC would restart production on the field on behalf of BP. As part of the mentoring arrangement, BP asked Savant Alaska to bring ASRC Energy Services into the project as a minority partner.
“If the Savant program is successful, and we are hopeful that it is, then we will have revitalized exploration options on the east-side of the North Slope and we will be a player in its future,” Mark Kroloff with ASRC wrote to Petroleum News in September 2008.
The two partners aimed to rejuvenate the unit by bringing modern hydraulic fracturing techniques to horizontal wells in the Brookian formation. Savant drilled several development wells and an exploration well and has managed to stabilize production.
Eventually, BP bowed out, transferring the operatorship to Savant Alaska. Toward the end of 2014, Miller Energy Resources Ltd. acquired Savant, making it a subsidiary.
ASRC continues to hold its minority stake in the project.
Other endeavorsIn addition to Placer and Badami, ASRC has participated in several other exploration programs over the past decade, including Jacob’s Ladder and the Nenana basin.
In 2004, ASRC joined a four-company joint venture led by Andex Resources to explore for natural gas in the Nenana basin, in the Interior region southwest of Fairbanks.
The group commissioned a 2-D seismic survey over an exploration license region in early 2005 but postponed the program in 2006 as lawmakers debated the state fiscal system.
Andex left the joint venture in 2007 and the other companies spent some time finding a replacement before finally drilling the Nunivak No. 1 exploration well in 2009. The results of the $15 million well were less than satisfactory to the partners, who left the program. Operator Doyon Ltd. has continued to explore the region independently.
And in 2006, ASRC and London-based BG Group joined operator Anadarko Petroleum Corp. on an exploration program at the Jacob’s Ladder prospect south of Badami.
The prospect targeted a geologic featured relatively unexplored in the North Slope: Karst topography, where water has eroded near-surface limestone to form extensive underground caves. These caves can be excellent for trapping oil and gas, as proven by the similar features in the epic Permian basin. The partners completed an exploration well in early 2008 but found “no commercial hydrocarbons” and abandoned the prospect.
As a major North Slope landowner, Arctic Slope Regional Corp. has also been involved in two pioneering exploration efforts: a 2-D seismic program and exploration well in the Arctic National Wildlife Refuge in the 1980s and Anadarko’s natural gas exploration program in the foothills of the Brooks Range Mountains over the past decade.