SLOPE EXPLORATION SLOW BUT HOPES REMAIN HIGH

Alaska North Slope exploratory drilling has been sparse this winter.

Attention focused on a pair of ARCO Alaska Inc. wildcats in the West Colville high sector west of Kuparuk River oil field and two BP Exploration (Alaska) Inc. wildcats in the Badami area at Mikkelson Bay. In both prospects, the drilling effort was to prove up more production that could support commercial development of the respective areas.

ARCO spudded Jan. 28 at West Colville high at the I Alpine, in 1-11n-4e. ARCO obtained permits for two sidetracks at the well. The second well is the 3 Fiord, in 25-12n-4e, about 7 miles northeast of the Alpine well.

Union Texas Petroleum Alaska Corp., agreed to pay an increased share of capital for the two wells in exchange for additional interest in about 103,000 acres in the West Colville area. The agreement increased the company's average working interest to 22% from about 13.2%.

ARCO drilled two exploratory wells at Colville as part of its 1994 winter program. The wells were the 2 Fiord, in 24-12n-5e, and the 1 Bergschrund, in 32-12n-5e, 4 miles southwest of the 2 Fiord. Results are confidential, but spokesmen for ARCO and Union Texas said the companies were encouraged by results.

The Fiord well was located 3 miles southeast of ARCO's 1 Fiord, in 2-12n-5e, drilled in 1992, which flowed an average of 1,065 b/d of oil from one zone and 180 b/d from a second interval after fracturing. ARCO in 1992 also drilled the 1 Kalubik, in 11-13n-7e, which flowed at a rate of 1,200 b/d from one interval and from another, after frac, at a rate of 410 b/d.

ARCO followed the 1992 program with three wildcats in 1993, including the 3 Kuukpik, in 22-13n-6e; ARCO/BP 1 Till, in 10-12n-6e; and the ARCO/BP 1 Colville River, in 17-11n-6e. All were tight holes.

Before ARCO picked up operational reins in 1992, four other wildcats scattered over the Colville area had been tested at high rates. The wells included three drilled by Texaco and one by Amerada Hess.

Of this year's effort, Ken Thompson, ARCO Alaska president, said, 'Based on results, we will then make an assessment of the next steps. More than likely that would mean further delineation next season before making a decision on whether Colville is commercial."

One other exploratory well is on the agenda for ARCO in this year's North Slope season. The company spudded Mar. 2 at the NK-27 Niakuk No], an extension test just west of the existing Niakuk Unit, which is operated by BP Exploration.

At Badami, 35 miles east of Prudhoe Bay, BP spudded Jan. 19 at the 5 Badami, in 5-9n-20e, and Feb. 1 at the 4 Badami, in 3-9n-20e.

Pending results, the company is looking at developing Badami with extended reach wells drilled from shore.

Badami field, a 1990 discovery by Conoco Inc. as operator and Petrofina, is estimated to contain as much as 150 million bbl of reserves. BP acquired Conoco's interest in the field in January 1994 as part of the acquisition of Conoco's interest in the Milne Point field in return for assignment of a 33% stake in BP's wholly-owned Amberjack field in the Gulf of Mexico.

MUCH MOPE EXPLORATION

Though there has been relatively little exploratory drilling this winter, both of the slope's major producers have indicated they are far from finished with exploration in Alaska.

"We will continue to explore in Alaska," said ARCO Alaska's president, Ken Thompson. "We have a long-range plan of $150 million over the next five years, focusing on areas accessible to transportation."

Of BP Exploration (Alaska) Inc.'s role, John C. Morgan, president, said, "We have a very real inventory of exploration and development prospects to pursue if we can successfully compete for investments that will enable us to transform potential into projects.

"We now expect Alaska to provide nearly a third of our worldwide oil production after the turn of the century, even with our successes elsewhere. The proportion could be even bigger if we're able to capitalize on additional opportunities we know exist," Morgan added.

ANWR DEBATE

While past efforts to open the coastal plain of the Arctic National Wildlife Refuge to oil exploration have not been successful, the battle is far from over.

On the side opposing lockup, there is rising hope that the tide may turn with Alaska's congressional delegation of Sens. Ted Stevens and Frank Murkowski and Congressman Don Young moving into key leadership positions with oversight of ANWR legislation.

"Alaska's agenda has been overlooked for far too long and we have a chance to make some very positive and responsible changes with regard to resource development," Murkowski recently told the board of Arctic Power, a 9,400 member group that is spearheading the drive to open ANWR.

On the side favoring lockup, there is no retreat. In the new Congress, 70 members of the House of Representatives and 15 senators have cosponsored bills to permanently ban oil exploration on ANWR's Coastal Plain.

"ANWR exploration is simply not worth the risk" said Sen. Joe Biden, one of those sponsoring permanent lockup of ANWR. "The real damage would come from the hundreds of miles of pipelines that would have to be run across the tundra."

Murkowski said the energy committee, which he chairs, will hold hearings before yearend to inventory resources on all federal lands, and that examination logically may result in legislation to open ANWR.

LEASING, LICENSING

The State of Alaska after opening bids for only one sale last year - Cook Inlet Sale 78 - has five North Slope sales proposed for the next five years.

The first would be Shaviovik Sale 80, tentatively scheduled for November 1995. The proposed sale includes 202 tracts covering approximately 951,302 acres generally located between the Canning and Ugnuravik rivers in the North Slope Borough. The sale area consists of state-owned uplands and tide and submerged lands on the North Slope and in the Beaufort Sea. Hydrocarbon potential is considered low to moderate.

Other proposed sales are Central Beaufort Sale 86, offering 700,000 acres of tide and submerged lands in the Beaufort Sea extending from the Colville to the Canning River, with moderate to high hydrocarbon potential, November 1996; and North Slope Sale 87, which may contain as much as 2 million acres between National Petroleum Reserve Alaska and the Umiat Meridian in the east and from the Beaufort Sea south to the Brooks Range, with low to high hydrocarbon potential, May 1997.

Also, Western Beaufort Sea Sale 83, offering 500,000 acres of tide and submerged lands in the Beaufort Sea extending from near the mouth of the Colville River west to Point Barrow, with moderate to high hydrocarbon potential, May 1998; and Beaufort Sale 89, offering 600,000 acres of tide and submerged lands in the Beaufort Sea extending from the mouth of the Colville River west to the Canadian border, with moderate to high hydrocarbon potential.

North Slope Sale 87 at 2 million acres would be the largest in Alaska's history. The sale also could set the stage for a possible first-round offering under the state's new exploration licensing program, which was designed to encourage exploration by allowing companies to choose areas large enough to explore an entire geological prospect.

Approximately two-thirds of the Sale 87 area is located below the Umiat Meridian in the area that is being considered for exploration licensing some time after Sale 87. The exploration licensing initiative adopted by the legislature last year requires available state lands be offered at least once under competitive leasing before they can be offered for licensing to operators based on their plan and work commitment.

Exploration licensing will allow tracts up to 500,000 acres each, which is much larger than permitted under competitive leasing. Alaska's exploration licensing program is believed to be the first of its kind in the U.S.

It is hoped the program will make the state more competitive with countries that offer incentives giving companies exclusive access to large areas.

FEDERAL LEASING OUTLOOK

The U.S. Interior Department's Minerals Management Service's next OCS sale offshore Alaska's northern coast in the Beaufort Sea is tentatively scheduled for early 1997.

The Beaufort Sea Sale 144 area includes 1,879 blocks encompassing about 9.8 million acres 3 to 140 miles offshore in 7 ft to 10,000 ft of water, with a majority of the area in water less than 300 ft deep. The area is considered to hold substantial reserves of oil.

MMS has conducted 62 environmental, social, and economic studies exclusive to the Beaufort Sea Planning Area since the mid-1970s at a cost of more than $16 million. A draft environmental impact statement is scheduled for completion before yearend.

There have been five sales in the area between December 1979 and June 1991. Lessees have drilled 28 exploratory wells. Nine of 631 leases issued by MMS were determined to be producible although none is currently considered economically feasible. Five oil and gas companies identified areas of interest in the proposed sale area.

RUSSIAN-U.S. LEASING

MMS in February canceled the prospect of a simultaneous sale of leases by the U.S. and Russia in the Chukchi Sea off Alaska's northwest coast because of limited industry interest and concerns raised about natural resources.

MMS last year had issued a request for interest of the American oil and gas industry in such sales. The request was in response to a proposal by the Russian Federation Committee on Geology that simultaneous sales be held on both sides of the international border.

As visualized, the U.S. and Russia would conduct their own sales but would exchange environmental, geological, technological, and cultural information on the Chukchi Sea region.

The response when MMS asked for comments from the American industry was lukewarm. The December deadline for public comments drew no response by oil companies to a Russian sale and responses from only two on a U.S. sale. Most comments, according to MMS's regional office in Anchorage, were from groups expressing concern about drilling impacts on wildlife and the environment.

The simultaneous sales had been proposed for 1997. Though declining to hold a sale in U.S. waters that year, MMS still has the option of including the sale at a later date in the five-year leasing program from 1997 to 2002.

Simultaneous sales had been seen as a way of integrating the training being provided by MMS to Russian counterparts on the management of oil and gas resources with the development of an actual proposal for the private sector. Cooperation between MMS and Russian agencies in leasing tracts in the remote area was seen as benefitting both Russia and the U.S. by allowing them to coordinate environmental protection measures and increase the scientific data available to each country. Simultaneous sales also were seen as a means of allowing industry to better plan exploration and development activities in the Chukchi Sea.

There has been no previous drilling in the Russian portion of the sea. On the American side, during three drilling seasons in the summers of 1989, 1990, and 1 991, Shell and partners tested four prospects with expendable holes that went to depths ranging from 8,200-12,000 ft. Chevron tested one prospect with a 6,745 ft wildcat. No significant shows were reported in any of the wells.