In late September 2016, Great Bear Petroleum Operating LLC announced that it had identified eight conventional oil prospects on its leases south of Prudhoe Bay.
The announcement highlighted the unusual situation of source rock exploration and development on the North Slope at the moment, where the few companies interested in the play have decided to pursue conventional targets in the short term as a way to establish infrastructure and cash flow to support unconventional work in the future.
Great Bear officials have described an “Alaska Shale Play Catch 22.” Source rock exploration and development can only become profitable through a large economy of scale. But creating a large economy of scale would require some early profitability.
“What we recognized was that we really needed to find a more conventional play first and have that be the backstop to justify the infrastructure investment,” Chief Commercial Officer and general counsel Pat Galvin said during the Alaska Oil and Gas Congress. “Once the infrastructure is in place, the unconventional play would be economic.”
Although the company has no firm exploration plans at the moment, Galvin said that the current crop of leads were stacked, allowing all eight to be targeted with two wells. All but one of the leads are in the Brookian sequence; the outlier is in the Kuparuk. A majority of the prospects connect to oil shows from the nearby Pipeline State No. 1 well.
The new prospects follow five seasons of seismic activity. The company permitted an additional seismic program - its sixth - over a portion of its lease earlier this year.
In a move that might prove to be related, or at least adjacent, to its short term shift toward pursuing conventional oil targets, Great Bear purchased a small working interest in the Badami unit on the eastern North Slope from Arctic Slope Regional Corp. in mid-2016.
Oilfield services company Halliburton Co. and Australian independent Otto Energy both have minority interests in a portion of the leases in the Great Bear holds in Alaska.
2010-2013Great Bear purchased its initial 500,000-acre leasehold during a state sale in 2010, when unconventional oil was overhauling domestic energy production in the Lower 48.
The company envisioned launching a similar revolution in Alaska.
From a geological standpoint, the idea was to trace the oil in the prolific conventional reservoirs on the North Slope back to their source rocks, and develop those directly.
Studies had indicated that the source might be three stacked rock formations to the south of the Prudhoe Bay and Kuparuk River units. Using horizontal drilling and hydraulic fracturing, Great Bear saw the potential for developing all three source rocks at once.
The location of the leasehold initially seemed ideal. Being so close to the Dalton Highway allowed the company to avoid seasonal restrictions and work year-round.
Great Bear identified six well locations and drilled two stratigraphic wells - Alcor No. 1 and Merak No. 1 - in the summer and fall of 2012. The smaller than anticipated drilling program was the result of a later than expected start and the pending end of a rig contract.
In addition to collecting core samples, the company also commissioned a 3-D seismic survey to identify future drilling locations and possibly some conventional leads.
Early on, Great Bear touted its potential to revolutionize the Alaska oil industry with source rock development. The program would require significantly more wells than a conventional development and could theoretically add hundreds of thousands of barrels of oil production each day to the waning throughput on the trans-Alaska oil pipeline.
2013-2015The results of the initial drilling program revealed the difficulties in reaching that goal.
While the location of the leases was useful from a logistical standpoint, it was less than ideal from a historical standpoint. The area had relatively little prior exploration activity.
Great Bear prioritized additional seismic activities as a way to expand and refine its inventory of high-impact prospects across the leasehold. The company commissioned 3-D seismic surveys in 2012, 2013 and 2014 and assembled a team of geoscientists to compile a database to help identify potential sweet spots for future source rock development.
After completing those 3-D seismic surveys, Great Bear launched a second round of drilling activity designed to target both conventional and unconventional prospects.
The original program called for drilling three exploration wells, although Great Bear was only able to complete one - Alkaid No. 1 - before the end of the drilling season in early 2015. And the flooding along the Dalton Highway that winter prevented the company from testing the well. “We’re looking for an opportunity to go back and test it, but we’re encouraged by what we found there,” Galvin said at the Alaska Oil and Gas Congress.
2016 onIn early 2016, Great Bear returned to seismic activity. The company hired Geokinetics Inc. to conduct a 3-D seismic survey over some 450 square miles immediately south and southwest of Deadhorse in early 2016. For this year, Great Bear hired the company to conduct a 3-D seismic survey over some 64 square miles south of the village of Nuiqsut.
In early 2017, a Great Bear subsidiary called Great Bear Petroleum Ventures I LLC transferred 1.61 percent royalty interest in 31 North Slope leases to Geokinetics USA Inc.
The five previous surveys provided Great Bear with more than 1,000 square miles of coverage across its acreage. The company focused on the central section of its leasehold from 2012 to 2015 and has moved farther west and east in its more recent surveys.
At a Resource Development Council meeting in mid-November 2016, Galvin said that Great Bear and its investors had spent about $80 million on exploration and were waiting on tens of millions of dollars from the state in the form of outstanding tax credits.
In early 2017, the state terminated six leases held by a Great Bear subsidiary for failure to pay rent. The leases were located in two clusters and were scheduled to expire in 2025.