North Slope satellite projects spark Alaska exploration

May 26, 1997
A new era is dawning for exploratory drilling on Alaska's North Slope. It is one of optimism largely fueled by targeting satellite accumulations ( Fig. 1 [44117 bytes] ). Ken Thompson, president, ARCO Alaska Inc., says, "We define satellites as fields that can be developed at low cost and produced through existing North Slope facilities. "To date we have identified 50 to 60 small to medium prospects that fall into this category. We expect to drill 10 to 12 satellite prospects a year over
Cook Inlet basin, which gave Alaska its first significant oil discovery in 1957, attracts new exploratory interest by basin newcomers Anadarko Petroleum Corp. allied with ARCO Alaska Inc. and Forcenergy Inc. allied with Unocal Corp. Photo courtesy Unocal.
A new era is dawning for exploratory drilling on Alaska's North Slope. It is one of optimism largely fueled by targeting satellite accumulations ( Fig. 1 [44117 bytes]).

Ken Thompson, president, ARCO Alaska Inc., says, "We define satellites as fields that can be developed at low cost and produced through existing North Slope facilities.

"To date we have identified 50 to 60 small to medium prospects that fall into this category. We expect to drill 10 to 12 satellite prospects a year over the next 5 years.

"These are oil accumulations that range in size from 10 million bbl to 100 million bbl, maybe more. We estimate these accumulations could contain potential recoverable reserves of 1 billion bbl."

While satellites draw attention, ARCO does not intend to give up the search for larger accumulations with farther out exploratory wells.

"We plan to stay Alaska's most active wildcat oil explorer," Thompson said. "We have the largest leasehold in the state (Fig. 2 [44367 bytes]). The North Slope is a prolific oil base which industry has traditionally explored for giant fields. Today that's changing because our new cost structure enables us to pursue development of 100 million bbl fields in areas away from existing infrastructure. This is important because the statistical probability for finding new North Slope fields in the 100-300 million bbl range looks very promising."

ARCO is off to an active start. "We would like to drill 10-12 exploratory wells this year in the Kuparuk and Prudhoe area," said Mike Richter, vice-president, exploration and land, "near existing infrastructure." Only one wildcat on ARCO's 1997 program is far removed from existing facilities.

"The focus won't be solely on finding very large fields," Richter said. "We'll keep looking for them, but we can have success with discovery of less than supergiants."

Operating costs slashed

Two of the major factors that are making satellite prospects acceptable are lower costs and 3D seismic, Richter added.

"ARCO Alaska Inc. working with our partners and contractors reduced its overall North Slope net lease operating costs in existing fields from $309 million in 1991 to $190 million, a 38% reduction," Richter said ( see table [13009 bytes]). "Controllable support for overhead costs has been reduced even more, from $68 million/year in 1991 to $32 million in 1996, a 53% reduction. On a per barrel basis, lease operating and overhead costs have been reduced from $2.29/bbl in 1991 to $1.54/bbl in 1996, a 75¢/bbl savings. On the development side, since 1991 the cost of drilling new wells is down 33%."

Point McIntyre field is "a wonderful example" of what satellites can do, Richter said. The field was discovered in March 1988 by ARCO/

Exxon's 3 Point McIntyre, in 15-12n-14e. Point McIntyre was developed using an existing processing plant at nearby Lisburne field, which had been designed to process 100,000 b/d of oil. When Lisburne's production peaked in the late 1980s at 40,000 b/d, well below design capability, the processing door was opened not only for Point McIntyre but also for satellites Niakuk, West Beach, and North Prudhoe State.

Today the satellites have joined declining Lisburne production in putting some 200,000 b/d of oil through enlarged Lisburne facilities. The satellite Point McIntyre field in the first quarter accounted for 166,400 b/d of the 200,000 b/d processed by Lisburne facilities.

3D seismic contributing

Modern technology in the form of 3D seismic also is contributing toward acceptance of satellites, tagging upper and lower sands not presently produced in the Prudhoe-Kuparuk sector as well as fault blocks outside field limits.

"Some of the satellites are very low risk and others are a gleam in geologists' eyes," Richter said. "Our 3D seismic this year is probably going to set a record. We'll probably have more than 500 sq miles, with 200 sq miles west of Kuparuk River field and the other 300 sq miles in the Point Thomson area." BP Exploration (Alaska) Inc. is the operator for the latter survey in which ARCO shares interest.

1997 satellite program

ARCO in a joint venture with BP initiated the 1997 satellite drilling program on Jan. 30, spudding the 2 Tarn, in 23-10n-7e, off Kuparuk River field's southwest flank.

The exploratory well proved up a new field discovery. Testing yielded a steady stimulated flow rate in excess of 2,000 b/d of 38° gravity oil from a sandstone reservoir discovered at 5,200 ft. ARCO-BP followed with 3 Tarn, in 34-10n-7e, which included a sidetrack, and 4 Tarn, in 1-9n-7e. The two follow-up wells and the sidetrack found oil. Possible reserves have been estimated at 50 million bbl of oil. ARCO owns 58.5% interest in the Tarn prospect, and BP holds 42.5%.

The next satellite well was a joint ARCO/BP venture with BP as operator. The 1 Pete's Wicked, in 15-12n-13e, in Gwydyr Bay off the northern edge of Prudhoe Bay field, is still being evaluated.

Next in the satellite program was the ARCO-operated 1 Goldhill, in 28-11n-9e, a deeper pool test in the southwestern part of Kuparuk River field. The well was an exploratory dry hole and was plugged back to be used as a Kuparuk "C" sand development producer.

Still to be drilled in the satellite program are the Cache and Tabasco prospects, which are joint ventures with BP in the Kuparuk Unit. The Cache well will test three prospective horizons below the Kuparuk reservoir. The Tabasco well is a follow-up to a well drilled and tested in 1995 that indicated the shallow Tabasco zone could be commercial. The planned 1997 well will test a separate Tabasco accumulation identified with data from a 3D seismic survey.

Other 1997 satellites

Other prospects to be drilled this year in the satellite program include Schrader Bluff, Shearwater, Stampede, Niakuk New, and three others. Estimated possible reserves if these prospects in the Prudhoe-Kuparuk sector prove successful are 380 million bbl of oil, including already discovered Tarn.

The first Niakuk well will be a directional hole drilled to test a fault block farther out than present production in the East Niakuk area. Additionally, a well in the western portion of the field is programmed for more than 20,000 ft of extended reach from the onshore drill site, which would set a record for the North Slope.

Of the satellite program, ARCO's Richter pointed out that seismic before 3D had largely explored the North Slope looking for 500 million bbl or more accumulations and only lightly explored for smaller fields. The present cost structure and progressive attitude of the state have opened up a score of opportunities for satellite drilling, Richter added, and with success the opportunity to bring production on more quickly. "We feel very good about our future," he said.

Nonsatellite prospect

Along with exploratory targeting of satellites, ARCO plans to test another prospect far east of Prudhoe Bay field and existing infrastructure. "The Warthog prospect will be ARCO Alaska Inc.'s most significant exploratory well this year," Richter said.

ARCO will look for a new field with the wildcat in Camden Bay 3 miles offshore from the north boundary of the Arctic National Wildlife Refuge and 30 miles east of the Canning River delta. The 100% ARCO project will be drilled from as shallow water as possible in an area where water is 15-20 ft deep.

The drill site for the directional hole will be on an Outer Continental Shelf tract leased by ARCO. The tract offsets the ARCO-held state tract that will be tested. The well will bottom 5,000 ft from the surface drill site.

ARCO will use Global Marine's concrete island drilling system (CIDS) to drill the Warthog. The assignment will be the first for the concrete island since 1990, when it was used to drill the 1 Stinson in the Camden Bay area 6 miles east of undeveloped Point Thomson gas/condensate field. The expendible wildcat, a joint venture of ARCO and Phillips Petroleum Co., was a tight hole that, according to field sources, went to about 15,500 ft, cementing a deep string of 95/8-in. casing before testing.

Alpine under development

Another North Slope sector holds ARCO's interest. To the west of Kuparuk field, Alpine field now under development by ARCO as operator for itself, Anadarko Petroleum Corp., and Union Texas Petroleum Alaska, borders on the east National Petroleum Reserve-Alaska ( Fig. 3 [54293 bytes]).

The partnership's ownership at Alpine positions it well for the resumption of leasing by the federal government in NPR-A.

"The Department of Interior has undertaken the environmental studies required to allow leasing in the northeast quadrant of NPR-A adjacent to Alpine field," said ARCO Alaska's Thompson. "A sale could occur as early as the fall of 1998.

"We have assessed this area better than any other oil company. Over the last few years we have conducted regional geological and geophysical studies and have acquired exploration rights to native-owned and native-selected lands within NPR-A."

BP and the long term

BP Exploration, like ARCO, is optimistic about the future in Alaska.

At the annual meeting of the Alaska Support Industry Alliance last January in Anchorage, Richard Campbell, president, BP Exploration (Alaska) Inc., described Alaska as "the single largest source of production for BP worldwide" and said "it is now positioned to remain a cornerstone of the BP global portfolio for many years to come.

"For anyone who had doubts about BP's long term commitment and leadership in Alaska while we've been investing half a billion dollars a year in capital projects in the state," Campbell said, "I trust those concerns have disappeared following the announcement made after the governor's (Alaska. Gov. Tony Knowles) visit to London last month that we plan to increase capital spending by $1 billion to $3.5 billion over the next 5 years. That's an average of $700 million/year.

"Alaskan developments must still compete with other BP investment options on a case-by-case basis, but these plans substantially to increase investment in Alaska were discussed in detail during the recent visit of Gov. Knowles and his commissioners to London, and they are fully endorsed at the highest levels of BP.

"A year ago, my colleague, Dick Olver (deputy CEO for BP Exploration in London) told this group that BP believes the potential for adding new reserves on the North Slope over the next decade amounts to some 5 billion bbl. Today, I can repeat his projection with an even greater degree of confidence."

Campbell added, "We anticipate development of several satellite accumulations in and around Prudhoe Bay and Kuparuk fields over the next few years once facility-sharing agreements have been forged among field owners."

Close-in Liberty prospect

One prospect Campbell mentioned was the Liberty prospect east of offshore Endicott field. "If the well proves up commercial reserves, we'll have yet another development opportunity within close reach of existing infrastructure," Campbell said.

BP had set the stage for the Liberty prospect with a 3D seismic survey before OCS Sale 144 on Sept. 17, 1996. The sale was the first federal offshore sale held in Alaska since 1991. BP was the largest bidder, spending more than $12 million at the sale where it acquired acreage on the Liberty prospect.

The company in early February spudded an appraisal well to test the prospect. The directional hole, 1 OCS-Y-1650, was drilled on an artificial island. The rig was released in early April. Details have not been announced.

BP/Chevron Sourdough

More drilling looms for another North Slope prospect in winter 1998. BP Exploration and Chevron USA in March confirmed an oil discovery on the Sourdough prospect in the southern Point Thomson area about 15 miles inland from the Beaufort Sea and 50 miles east of Prudhoe Bay.

The discovery was made by the 2 Sourdough, in 31-9n-24e. The exploratory well was drilled in 1994 and went to 12,600 ft before the rig was released 21/2 months after spud. Details were not released, but interest heightened when the state certified Sourdough as "capable of producing in paying quantities."

In April 1996, BP completed a confirmation well. The 3 Sourdough, in 29-9n-24e, proved up production about 1 mile north and slightly east of the 2 Sourdough. The drill site was about 1 mile west of the Arctic National Wildlife Refuge's coastal plain.

In March, BP reported that current information indicates Sourdough could contain about 100 million bbl of recoverable oil.

"BP and Chevron believe the field could be economically developable," said Eric Luttrell, vice-president of exploration and new developments for BP Exploration (Alaska) Inc. "We are in the process of planning further technical work in the area to determine the extent and economic viability of the discovery."

BP has a two-thirds interest in Sourdough and is field operator. Chevron holds the remaining one-third interest. Further exploration and appraisal options including a delineation well in winter 1998 are being considered.

Paul Laird, BP's associate director, external affairs, Alaska, said seismic data collected on the Sourdough prospect indicate that the field extends very close to ANWR, but it is not known if it extends beyond the boundary.

Cook Inlet prospects

While most of Alaska's exploratory interest focuses on the North Slope, the state's original producing area-the Cook Inlet basin-still holds exploratory interest.

A pair of newcomers to that part of Alaska are bringing a new perspective to Cook Inlet. One of the companies is Anadarko Petroleum Corp. The other is Forcenergy Inc.

Anadarko-ARCO combine

Anadarko and ARCO Alaska Inc. in September 1996 formed a strategic alliance to explore the Upper Cook Inlet. Financial terms were not disclosed.

Under the agreement, Anadarko, a Houston independent, manages an Anchorage-based exploration team consisting of geoscientists from both companies. Anadarko will serve as operator and earn a 50% share of ARCO's working interest in Cook Inlet leases by conducting new seismic surveys, completing other geological and geophysical studies, and drilling exploratory wells.

The 2 year agreement covers 127,000 acres of ARCO's Upper Cook Inlet leasehold but does not include the Sunfish prospect or Beluga River gas field. ARCO and Anadarko have been working jointly on exploration ventures on the North Slope for several years. The two companies, along with Union Texas Petroleum, share interest in Alpine field, which may prove to be a major development west of Kuparuk River field.

"We're pleased about this joint venture," said ARCO's Mike Richter about the alliance. "We're pleased to be bringing a new player with a record of exploration success to Cook Inlet. We're confident that working together we can develop new exploration ideas that bring increased activity to the region."

Anadarko and ARCO added to the alliance's leasehold at Alaska's Sale 85A Cook Inlet Exempt on Dec. 18, 1996, when the two companies teamed to win 10 tracts covering 38,763 acres for high bids totaling $832,596.

Forcenergy's outlook

Forcenergy Inc., a Miami, Fla., independent, entered the Alaska scene in October 1996 with acquisition of eight leases from Danco Exploration, Houston, in the Redoubt Shoal prospect in Cook Inlet. The leases expire in 1998, and Forcenergy plans to drill an exploratory well before that time that might finally put Redoubt Shoal field in the producing column for the first time some 30 years after its discovery.

Pan American Petroleum Corp. discovered Redoubt Shoal field in September 1968 with the 1 Redoubt Shoal State 2690, in 13-7n-14w, proving up a new field 5 miles southwest of Middle Ground Shoal field and 70 miles southwest of Anchorage. The well flowed 1,400 b/d of 28.2° gravity oil through a 2 in. choke from Oligocene Hemlock conglomerate at 13,260-845 ft.

Originally spudded on Aug. 26, 1967, the well had been suspended Dec. 13, 1967, at 13,991 ft. The hole was redrilled and deepened to 14,060 ft. The directional drilling job put the bottom of the hole in NE NW 19-7n-13w. The well has been shut-in since 1968.

Forcenergy followed up the Danco acquisition with an agreement in December for purchase from Marathon Oil Co. of certain oil production properties in Cook Inlet and Prudhoe Bay. In addition to oil interests, the sale included Marathon's equity in the Cook Inlet pipeline and Drift River Terminal, which are used to gather and transport crude oil on the west side of Cook Inlet. The sale price totaled $128.2 million, including $113.8 million for the oil and $14.2 million for the Cook Inlet pipeline and Drift River Terminal.

In a move to continue its emphasis on the natural gas business in Alaska, Marathon agreed to sell to Forcenergy its working interest in the oil producing properties of offshore McArthur River field in the Trading Bay Unit and offshore Trading Bay field in Cook Inlet, and the Prudhoe Bay Unit. Some of the properties were subject to preferential rights held by third parties. The producing properties in the Cook Inlet area, the Cook Inlet pipeline, and Drift River terminal are operated by Unocal.

Forcenergy followed up the acquisition from Marathon with an alliance with Unocal that was announced the day before Alaska's Sale 85A Cook Inlet Exempt on Dec. 18. Under terms of the agreement, Forcenergy committed to spend $30 million over the next 5 years on lease acquisition and development and on exploratory drilling of prospects generated by the alliance. In return, Unocal's contribution consisted of Cook Inlet infrastructure and expertise as well as access to the company's data base in the Cook Inlet basin. The data base includes about 43,000 miles of 2D and 3D seismic.

The Unocal and Forcenergy combine lost no time adding to the Cook Inlet leasehold. The partnership was the biggest spender at State Sale 85A on Dec. 18, putting up a total of $1,737,831.51 in high bids for 17 tracts covering a total of 72,380.78 acres. Forcenergy paid the bonuses as an installment on its commitment. According to present plans, the first exploratory well will be an onshore project, hopefully with drilling before yearend 1997 or next year for sure.

Phillips exploring

At the northern end of Cook Inlet, Phillips plans to drill a directional test well this year from Platform Tyonek in an effort to make commercial the discovery made in 12-11n-10w, 11/2 miles southwest of the platform, in 1991 by ARCO's 1 Sunfish. That 12,160 ft wildcat yielded 1,100 b/d of 42° gravity oil and 1 MMcfd of gas on a 24/64 in. choke from Tertiary pay that underlies earlier discovered gas pay. When extension tests of the Tertiary pay proved noncommercial, the prospect was put on hold.

Phillips and ARCO set the stage for another try in January of this year when an agreement was reached under which ARCO converted its 60% working interest in the prospect, renamed Tyonek Deep, to sliding scale, overriding royalty interest in any future production. The agreement, which involved no funds, contains incentives included to hasten drilling and production. The agreement will end in 2007 if Phillips fails to find commercial oil and/or gas.

Gulf of Alaska interest

ARCO continues to show exploratory interest in the Gulf of Alaska sector.

The company has filed for an exploratory license for onshore lands along the east side of the gulf. The application is the first under the state's new exploration licensing system, which allows larger amounts of acreage to be explored under a work commitment basis than would be possible with conventional leases.

ARCO's Yakataga application includes a work program in keeping with the licensing system. The state will ask others who may be interested to submit bids with work programs. If no other bids are submitted, it might be about a year before ARCO's application is decided.

Copyright 1997 Oil & Gas Journal. All Rights Reserved.