A third party engineering firm sees "a lot of upside potential for natural gas behind pipe and elsewhere" in the West Cook Inlet Nicolai Creek unit, which has been operated by Amaroq Resources for 7 years, Amaroq President G. Scott Pfoff told Petroleum News April 22.
"They have confirmed that our existing completed wells have a significant amount of natural gas to be produced behind pipe and they've seismically identified development drilling locations," he said.
"The whole reason we went to a third party, engineering firm was because we were going into the seventh year of operations ... we have not succeeded in returning Nicolai Creek to profitability," Pfoff said.
The company is "at a significant crossroads for the future," he added, noting "a major shift of focus for us is we're entirely focused on natural gas now," he said.
In the past Amaroq produced gas but was also focused on the potential for a major oil play. We have put the oil play completely on the shelf," Pfoff said.
"We see a much more reasonable pathway to profitability in pursuing natural gas," he said.
Biz model change
"Our business model has been to outsource geology, geophysics and engineering since neither Paul Craig or I are a geologist, geophysicist or an engineer," Pfoff said.
"So we're pursuing either a sale of the company or a partnership that can bring those resources to the table," Pfoff said.
Amaroq is also exploring third party financing.
All of those options, he said, required an independent engineering report to get off the ground.
VDR set up
Amaroq has set up a Virtual Data Room, or VDR.
The company has several confidential agreements in place with various E&P companies, as well as one utility, Pfoff said, but they're open to working with additional firms.
"The last thing we want to do at this time is plug and abandon a field with the potential natural gas upsides that the Nicolai Creek unit has, especially with the gas shortages anticipated in the next couple of years in Southcentral Alaska," Pfoff said.
Amaroq is also "a little bit under the gun" with the conditions in the latest plan of development, or POD, approved by the Alaska Department of Natural Resources' Division of Oil and Gas, which requires work to be completed by the end of 2025.
Amaroq had to commit to completing its plans for the workover of the NCU 3 well in order to restore production by the end of 2025; or since the company has identified 1 billion cubic feet of proven undeveloped gas reserves in the NCU 10 well, Amaroq had to commit to conducting a workover of, or redrilling of, the NCU 10 before the end of 2025.
"We are not opposed to the conditions -- we see most of the potential in the No. 10 well, but it's a matter of funding," Pfoff said.
And when Amaroq comes up with the funds, "we already have the infrastructure, the gathering lines, tied into the gas grid. We'd just have to lay a small amount of pipe," he said.
Deep oil, coalbed methane, gas storage
The third party engineering study only dealt with natural gas reserves. But there are other upsides to the Nicolai Creek unit, Pfoff said.
Although Nicolai Creek has only produced natural gas, there has been talk for many years of developing deep oil rights, which Amaroq finished acquiring from Apache Corp. in 2021.
The transaction involved approximately 5,000 net acres of "deep rights" on the Kenai Peninsula and the west side of Cook Inlet, underlying the Nicolai Creek gas producing unit.
All of the acreage acquired from Apache was onshore and covered depths below the Upper Tyonek formation.
The deal included a geophysical data license agreement granting Amaroq access to Apache's proprietary 3D data shot over the Nicolai Creek unit.
At the time, Amaroq said it planned to "process these data to evaluate the upside potential" at the Nicolai Creek unit; "particularly the Nicolai Deep and Nicolai Footwall prospects that target oil pay in the Lower Tyonek G and Hemlock formations."
"This transaction is very significant for Amaroq," Pfoff said at the time. "We are now well positioned to high grade several exploratory oil prospects that lie directly beneath Amaroq's shallow gas zones in addition to identifying potential development drilling locations for gas."
There is also a gas storage opportunity in the West Nicolai Creek unit, Pfoff said.
The gas storage opportunity involves the NCU 2 and is described in detail in the Alaska Oil and Gas Conservation Commission's Storage Injection Order No. 8 approved by the commission on April 16, 2010. AOGCC SIO 8 expired in April 2012, more than 7 years before Amaroq acquired the Nicolai Creek unit. The same storage reservoir proposed in 2010 could be revisited by Amaroq or a related company.
"And there is resource potential within coalbed methane," Pfoff said. "We see coal seams in our well logs."
Finally, the third party engineering firm only looked at 2,000 onshore acres; the rest of the 8,000 offshore acres were not part of their study.
--KAY CASHMAN
