Repsol has announced three “new good quality hydrocarbon discoveries” from its recently completed North Slope exploration program, the company said on April 23.
The Qugruk No. 1 and Qugruk No. 6 wells produced two hydrocarbon shows with “encouraging results during production tests,” and the Qugruk No. 3 well identified hydrocarbons “at multiple levels,” according to the Spanish supermajor. Repsol drilled Q1 to around 8,179 feet, Q3 to around 10,544 feet and Q6 to around 8,651 feet.
The wells are in the fairway between the Oooguruk unit and the Colville River unit.
“These results are encouraging for the future development of the resources discovered,” the company said, calling the North Slope an “oil-rich” and “especially promising” area.
Repsol operates the program and holds a 70 percent working interest in the leases. The Armstrong Oil & Gas subsidiary 70 & 48 LLC holds a 22.5 percent working interest and the Denver independent GMT Exploration Co. holds a 7.5 percent working interest.
The companies plan to return to the region next winter, according to Repsol.
Praising tax reform
Repsol connected the program to Senate Bill 21.
“Recent tax reform passed in Alaska was a critical factor in ensuring the development of this project, where extreme climate conditions and geographical remoteness result in high operating costs,” the company said in a statement.
Shortly before Repsol arrived in Alaska in March 2011, its future partner Armstrong connected exploration activities to a change in the state fiscal regime for oil production.
In a letter to the House Resources Committee in early 2011, Armstrong Vice President Ed Kerr praised House Bill 110, an earlier version of the recently approved legislation.
“HB 110 will have a significant impact on our capital expenditures and futures activities in Alaska. The improved fiscal terms as proposed by HB 110, particularly the portions of the bill that apply to activities outside of existing units, will give us the needed incentive to not only drill multiple new wildcat and delineation wells, but the motivation to drive certain projects to development.” Kerr also cited “more than a dozen ideas outside of existing producing units” that Armstrong hoped to drill and test over the next several years,” adding, “In many cases we know the oil is in place. The improved fiscal terms as provided in HB 110 will greatly affect whether these projects will get developed.”
And in November 2012, Bill Hardham, Alaska operations manager for Repsol, called the North Slope a “key area” for the company, but also said that early planning for development strategies for its leases highlighted “the challenges we have” as well as “the need for production tax reform here because we do have some challenges ahead of us.”
Internationally, Repsol is investing heavily in exploration.
By acquiring acreage in 14 new countries since 2004, Repsol was able to post a reserve replacement ration of 204 percent last year, according to the company. The current strategic plan includes a goal to replace reserves by at least 120 percent each year through 2016 and to increase production by 500,000 barrels of oil equivalent per day by 2016.
To meet those goals, Repsol plans to spend 80 percent of its roughly $24.8 billion capital budget over the coming five years on exploration and production areas, such as Alaska.
Discovery in two years
Repsol arrived in Alaska through a major deal in early 2011, picking up a 70 percent working interest in some 494,211 acres of 70 & 148 and GMT Exploration Co. leases south of the Kuparuk River unit, in the White Hills area and near the Oooguruk unit.
From the start, the companies viewed the transaction as the beginning of a partnership, with Repsol operating and financing activities and the independents (especially Armstrong) using previous North Slope experience to guide permitting efforts.
The momentum behind the program was clear from the numbers: of the $768 million Repsol spent on the deal, $750 million was reportedly slated for exploration work.
The partners began quickly by planning a five-rig, five-pad and 15-penetration program in the winter of 2011-12. In response to local concerns and regulations, Repsol eventually decreased the program to nine penetrations from three pads using three rigs.
A blow-out at the Qugruk No. 2 well in February 2012 forced Repsol to suspend drilling activities for weeks, but the company ultimately completed the Kachemach No. 1 well to a depth of about 10,100 feet, and the Qugruk No. 4 well to a depth of about 7,700 feet.
This winter, Repsol again attempted a three-rig three-pad program.
