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Vol. 26, No.37 Week of September 12, 2021
Providing coverage of Alaska and northern Canada's oil and gas industry

Last piece in place

Hilcorp assigns Jade remaining 5% of E. North Slope Sourdough oil prospect

Kay Cashman

Petroleum News

Jade Energy’s proposed Sourdough prospect well, Jade 1, is a big step closer to reality for early winter 2022-23. On July 27, Hilcorp North Slope assigned to Jade its 5% working interest in the Sourdough prospect, which is portions of state oil and gas lease ADL 343112, Area F, in the Point Thomson unit. (Jade already held a 95% interest per a farmout agreement with Point Thomson operator ExxonMobil and the other working interest owners.)

Hilcorp, like the other assignees, kept a small overriding interest in the acreage.

Transfer of the final 5% assignment had been delayed after BP approved it, but then sold its Alaska assets to Hilcorp, delaying Jade’s plans to drill in the winter of 2021-22.

Tom Stokes, director of Alaska’s Division of Oil and Gas under the Department of Natural Resources, told Petroleum News that Hilcorp’s lease assignment to Jade will be issued by his agency in the next week.

That action should allow the Alaska-based Jade to assume the development account balance for Sourdough carried by the division. The balance could be used by Jade to offset the impact of a 40% net profit share lease burden currently assigned to the Jade property.

Previous analysis by the Alaska Department of Revenue has shown that development of Sourdough would not be economic (a negative net present value) with a 40% NPSL burden in addition to the normal 12.5% royalty and other North Slope taxes to be carried by the project given the expected range of future crude oil prices, facilities construction costs and other related development cost elements. Mitigating much of the NPSL impact by applying the development account balance to future tax obligations would allow the project to become commercially viable.

Successful bathymetric survey

Jade recently finished its third helicopter supported bathymetric survey of the Point Thomson service pier, per its top executive Erik Opstad.

The survey was “very successful,” he told Petroleum News Sept. 2.

The survey showed there is enough water depth to allow a large barge of the type typically used to mobilize drilling rigs access the PTU Service Pier.

The company is considering using Nordic Rig 3 or Nabors 27E for the work. Nabors 27E is a powerful rig that has been used at Point Thomson several times in the past to drill its deeper condensate reservoir, while Nordic Rig 3 is viewed as a nimble alternative suitable for drilling the somewhat shallower Sourdough turbidites.

Rig mobilization by barge to Point Thomson is expected to occur in September 2022.

Pursuing the Brookian

The primary target, Jade told the division, is the “Point Thomson Brookian resource, which is 25 API gravity oil.” Opstad said the oil is contained within the over-pressured reservoir sands found throughout the Point Thomson unit and nearby Badami oil field, which is 22 air miles west of PTU.

Jade has also told the agency that the deployment of horizontal production wells is a critical element in commercializing the Point Thomson unit’s Brookian opportunity in Area F, “as well as its adjoining areas.”

The Sourdough lease, the most southeasterly in Point Thomson and adjacent to the western border of the ANWR 1002 area, holds two mid-1990’s Sourdough oil discovery wells in the Brookian that were drilled by BP (at the time partnered with Chevron).

In a 1997 press release BP estimated Sourdough held 100 million barrels of recoverable oil.

Jade told the division that the Brookian reservoir in Area F has been delineated and characterized by several wells that were drilled in and around the Point Thomson unit since the mid-1970s.

The two wells drilled in the Sourdough prospect itself were summarized by Jade as:

* BP drilled Sourdough 2 to 12,562 feet TVD (true vertical depth) in March 1994 and the well was plugged and abandoned.

* In 1996, BP drilled Sourdough 3, reaching 12,475 feet TVD in March. The well was suspended. The Alaska Oil and Gas Conservation Commission, or AOGCC, granted both wells extended confidentiality.

Connecting infrastructure

By building a 70,000 barrel a day liquids export pipeline at Point Thomson that connects to the Badami unit and thus moves oil and condensate to Pump Station 1 of the 800-mile trans Alaska oil pipeline, ExxonMobil improved the development economics of other oil prospects to the east.

Included in those prospects are Sourdough and Yukon Gold, its leases held by Regenerate Alaska, a subsidiary of 88 Energy. Yukon Gold is about 10 miles to the south of Sourdough; it’s also adjacent to the ANWR 1002 Area.

The Arctic National Wildlife Refuge, or ANWR, spans 19.3 million acres - roughly equal in size to South Carolina - in northeast Alaska. In 1980, Congress (and President Jimmy Carter) designated more than 8 million acres within ANWR as federal wilderness as part of the Alaska National Interest Lands Conservation Act, or ANILCA. That same legislation set aside the 1.57 million-acre ANWR 1002 Area for petroleum exploration and potential future development.

Note: Area F consists of approximately 7,647 non-adjacent acres in the northeastern and southeastern corners of the Point Thomson unit, but Jade is owner and operator of PTU Tract 32, ADL 343112 in the southeastern portion of Area F.



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