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Vol. 20, No. 7 Week of February 15, 2015
Providing coverage of Alaska and northern Canada's oil and gas industry

Taking another step

Great Bear starts drilling Alkaid well to the west of the Dalton Highway

Alan Bailey

Petroleum News

Great Bear Petroleum has started drilling its Alkaid exploration well from an ice pad to the west of the Dalton Highway on Alaska’s North Slope using the Nabors 106 drilling rig. The well spudded on Feb. 10, Pat Galvin, Great Bear’s vice president of external affairs and deputy general counsel, has told Petroleum News.

During a talk to the Commonwealth North Energy Action Coalition on Feb. 6 Galvin said that Great Bear had hoped to drill three wells, the Alkaid, Talitha and Phecda wells, this winter but, with the drilling starting a little later than planned, it may only be possible to drill two of the wells.

“It’s taking a bit longer than we’d hoped, so most likely we’re only going to get to Alkaid and Talitha,” Galvin said.

The camp supporting this winter’s drilling operations is located at the Phecda well pad, he said.

All of the wells are in the same general area, to the west of the highway. (See map page 22)

Great Bear is pioneering the possibility of developing source-rock oil plays on the North Slope, using a similar approach to the type of shale oil development that has revolutionized the oil industry in the Lower 48 states. However, the company’s business plan involves seeking conventional oil targets, to achieve rapid capital investment and early oil production, to underpin the economics of its operations, Galvin said. The resulting drilling infrastructure and wells can then act as a backstop for unconventional resource evaluation, he explained.

The hope is to drill and develop multiples layers, perhaps with both a conventional and a source-rock play, all from a single well pad, Galvin said.

Great Bear has acquired a large swathe of North Slope leases, to the south of the producing oil fields, in an area where the regional oil source rocks are thought to be at a level of thermal maturity conducive to the formation of oil rather than gas. And the company has conducted 3-D seismic surveys in its acreage every winter starting in 2012, both to trace out the subsurface structure of the North Slope oil source rock horizons and to locate the conventional prospects that can underpin the economics of the company’s drilling operations. Galvin told the Energy Action Coalition that this winter’s seismic survey has just started, with the seismic operations moving out from Great Bear’s ice road at the Alkaid well site.

Few previous wells

Galvin explained that a major challenge that Great Bear faces is the relative scarcity of existing wells in the region that the company is exploring. Shale oil development in Lower 48 plays such as the Eagle Ford has taken place in a region where there is an existing support infrastructure and thousands of previously drilled wells. As a consequence, a significant existing knowledge base can inform the application of new drilling and development technologies - unconventional oil development becomes as much an engineering project as a geology project, with a focus on designing wells to maximize oil recovery, Galvin said. On the North Slope, with only around a dozen previous wells in its leased acreage, Great Bear is trying to accelerate the necessary information gathering process, to enable the application of shale oil development techniques, he said.

In 2012 Great Bear drilled two wells, the Alcor and Merak, to the east of the Dalton Highway, between the highway and the Sagavanirktok River. Those wells, primarily drilled for data gathering, penetrated the major North Slope source rock intervals and yielded a large number of rock cores that Great Bear subsequently analyzed.

“The analysis showed that basically the properties of those source rocks met or exceeded our pre-drill expectations, both with regard to the organic component ... and the thermal maturity and some of the other characteristics that really separate your oil-prone, gas-prone source rocks,” Galvin said. “We’re very pleased with the outcome of those wells.”

Lease came available

Galvin said Great Bear had picked the prospect targeted by its current Talitha well using seismic data acquired in 2013. But the lease containing the prospect had not been available until recently and the company had only been able to obtain the lease a month ago.

“We’ve been watching this lease very closely,” Galvin said. “We were able to pick it up in this last lease sale and we’re excited to be able to drill on that location here this winter.”

Galvin expressed his company’s appreciation of the efforts made by the Alaska Department of Natural Resources and the Division of Oil and Gas in issuing and permitting the lease in short order.

“We were able to demonstrate to them the significance of this prospect and they were able to fast track the issuance of the lease,” he said.

Prospect west of highway

The Alkaid well is located about two-and-a-half miles west of the Dalton Highway and trans-Alaska oil pipeline corridor, with a conventional oil prospect that stretches toward the road and the Merak and Alcor wells, Galvin said. If Great Bear makes an oil discovery at Alkaid, it may be possible to drill again from drill mats and begin test oil production in the summer - oil could be trucked to facilities in Prudhoe Bay at a rate of perhaps 8,000 to 10,000 barrels per day, he said. A subsequent on-site production facility and a pipeline connecting to the trans-Alaska pipeline would later enable a production ramp up, he said.

And, if the drilling program proves successful, there is the possibility of continuing with drilling in some of the six locations that Great Bear has permitted along the Dalton Highway and that are accessible year-round rather than only during the winter, Galvin said.

Galvin commented that Great Bear is going to spend about $50 million on its drilling and seismic operations this winter, with about 60 people working the drilling rig, additional people needed for any well testing and further people engaged in the seismic operation. He commented on the importance of Alaska exploration credits in the economics of the drilling program.

“We would not be drilling these wells with the financing that we currently have without the tax credits,” Galvin said. Essentially, the state takes on a large part of the exploration risk, thus opening the door to the investment of private capital, he said.

LIDAR surveys

In addition to conducting seismic surveys in its North Slope acreage, Great Bear has been carrying out aerial surveys using a technique called LIDAR, a laser-based technique that enables the surface topography to be mapped rapidly and with great precision. The resulting charts, with surface elevations measured within a centimeter or so, will enable Great Bear to efficiently plan exploration and development projects. For example, the company used its LIDAR data to plan a route for the ice road it has built for this winter’s drilling, Galvin said.

And the use of the technique is cheaper than manual mapping - a week of aerial surveying during the summer of 2014 enabled Great Bear to accurately determine the bathymetry of around 5,500 North Slope lakes, Galvin said.

Oil prices

Asked about the potential impact of the current low price of oil on Great Bear’s North Slope program, Galvin said that people are willing to take the risk of drilling exploration wells in the expectation that oil prices will climb back up at some time in the future. But, with a breakeven price of around $50 for future oilfield development, Great Bear would need to look at its economics if the oil price stays at around that level for an extended period of time.

Galvin also commented that, with oil production rates from an unconventional development such as the development of oil source rock resources being directly related to the number of development wells drilled, production rates from a North Slope development of this type would be a function of the level of comfort of the Alaska community with the rate of drilling new wells. The rate of permitting of new wells would likely have to be much higher than what it is at present, he said.

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