A world class oil discovery has revived hopes that Alaska's North Slope may sustain its status as a premier petroleum province well into the next century.
The Kuvlum strike by an ARCO Alaska Inc. group off the Arctic National Wildlife Refuge has rekindled industry interest in the North Slope/Beaufort shelf region as a still highly prospective exploratory frontier.
Meantime, a surge of exploratory and delineation drilling on Alaska's North Slope and in the Beaufort Sea has been led by ARCO and the Alaska unit of British Petroleum Co. plc. The two companies, the key North Slope operators, are seeking to forestall the day when North Slope oil production won't be enough to economically sustain the Trans-Alaska Pipeline System (TAPS).
Their efforts and others' have yielded a string of oil discoveries in recent years that may not approach Prudhoe Bay's supergiant status. However, because some sizable finds are within striking distance of the North Slope infrastructure, they could prove commercial if developed together.
In addition, using advances in exploration technology, operators continue to discover small-by North Slope standards-accumulations in the shadow of Prudhoe Bay area facilities.
At the same time, North Slope operators are pressing extensive efforts to extend the life of Prudhoe Bay, Kuparuk River, and other North Slope fields with enhanced recovery and other programs to tap more of the billions of barrels of oil that otherwise would be left unrecovered.
And a major exploration/development push is under way in Alaska's Cook Inlet basin, where another ARCO group also has found-a world class oil discovery and operators are trying to extend the life of aging offshore platforms (OGJ, May 24, p. 23).
It adds up to an impressive E&D revival in a high cost state that until recently had seen an exodus of companies following offshore exploratory disappointments and plummeting oil prices in the 1980s.
KUVLUM EXCITEMENT
Alaska's northern focus is on the ARCO group's Kuvlum oil discovery in the Beaufort Sea.
ARCO estimates the Kuvlum reservoir may hold reserves of as much as 1 billion bbl or more (OGJ, Apr. 19, p. 20). More drilling is scheduled in the area.
"We're in permitting for two locations," said James M. Davis, ARCO Alaska's senior vice-president for exploration and land. "One will be about 5 miles southwest of the discovery. Another will be to the north within 3 miles."
The rig will be BeauDril Kulluk, a semisubmersible designed for use in arctic waters, which drilled the discovery well last year.
Also on the agenda is a 3D seismic survey, which will be run after ice clears in July or August. The survey will cover the 35,000 acre Kuvlum block.
The well that touched off the Kuvlum play was ARCO's 1 OCS Y-0866, which flowed 3,400 b/d of 34 gravity oil at a wellhead pressure of 300 psi with a 600:1 GOR. The well was drilled in 110 ft of water 60 miles east of Prudhoe Bay and 16 miles offshore from the western edge of the Arctic National Wildlife Refuge Coastal Plain,
If Kuvlum measures up to the 1 billion bbl mark-there is a marginal chance for significantly greater upside potential-regarded by ARCO as necessary to support development, the economics for other accumulations along the Alaskan coast could change.
"I would think it would affect Point Thomson and Badami," Davis said.
The former, a 1975 discovery by Exxon Corp. about 5 miles west of the ANWR boundary, is estimated to hold reserves of 7 tcf of gas and 300 million bbl of condensate. The latter, a 1990 discovery by Conoco Inc. 20 miles east of Endicott field, has yet to be delineated.
ARCO is Kuvlum operator with a 50.42% working interest. Its partners are Union Texas Petroleum Alaska Inc. 20%, Phillips Petroleum Co. 12.58%, Total Minatome Corp. 12.5%, Murphy Oil USA Inc. 3.94%, and Mobil Exploration & Production U.S. Inc. 0.56%.
Kuvlum's nearness to ANWR has raised the question of whether development of the field would increase pressure to open ANWR to exploration and development.
"Geologically, there isn't any connection between the two," Davis said. "I don't think developing Kuvlum would necessarily put any pressure on opening ANWR.
"If ANWR is opened, it doesn't mean all of the problems go away. It doesn't look like ANWR is going to be opened. The state has control of its resource. It's time to focus on state acreage. Most of the area north of the Brooks Range was explored in the 1960s and 1970s. Geophysical technology has changed considerably since then. We think it's time to explore there again."
COLVILLE HIGH
One area that is undergoing such exploration is the Colville High area along the Colville River delta west of Kuparuk River field, where six wildcats scattered over a large area have yielded oil.
The wells include three drilled by Texaco Inc. and one by Amerada Hess Corp. prior to ARCOs 1 Fiord in section 2-12n-5e and 1 Kalubik in section 11-13n-7e, both drilled last year. The Fiord well flowed oil from one interval at a rate of 1,065 b/d and from another, after hydraulic fracturing, at a rate of 180 b/d. The Kalubik flowed oil at a rate of 1,200 b/d from one interval and from another, after hydraulic fracturing, at a rate of 410 b/d.
During this year's winter season, ARCO drilled three wildcats related to the Colville High: 3 Kuukpik in section 22-13n-6e, ARCO-BP 1 Till in section 10-12n-6e, and ARCO-BP 1 Colville River in section 17-11n-6e. All were tight holes.
"We're aiming at separate accumulations," Davis said. "The job is to identify a critical number of accumulations which on their own would be subeconomic."
The goal is to find enough oil to warrant construction of a centralized processing plant at a site to which oil could be piped from as much as a 40 mile radius.
In addition to the wildcats related to the search for Colville oil, ARCO during the winter season drilled two wildcats in the central foothills area in a search for what Davis called "stand alones."
The wildcats were 1 Big Bend in section 24-3s-2w and 1 Tulaga No. 1 in section 14-4n-4e. Both tight holes were within a 40 mile radius of Umiat oil field, a 1946 discovery by the U.S. Navy, and East Umiat gas field, a 1963 discovery by BP Exploration (Alaska) Inc. Three wells were completed in the oil field, which has been shut in since 1951. Only one well was drilled in East Umiat. It was suspended.
Other exploratory wells drilled by ARCO during the winter season were 1 Jones Island in 28-14n-11e, 12 miles northeast of Milne Point oil field, and 3 North Prudhoe Bay State in section 25-12n-14e, a follow-up to the company's 4 West Beach State, a 1991 new pool discovery.
Results of the Jones Island well were not released. A 4 hr test of the Ivishak formation in 3 North Prudhoe Bay State flowed 35 gravity oil at a 3,000 b/d rate.
ARCO described production as comparable to the nearby West Beach field, which went on stream Apr. 8, producing 3,000 b/d from the discovery well (OGJ, Apr. 26, p. 27). West Beach is estimated to hold 10-65 million bbl of oil. Operator ARCO and Exxon hold equal interests in West Beach.
BP'S WILDCAT PROGRAM
BP resumed wildcat drilling on the North Slope this year with the company's largest exploration program in Alaska since 1985. Plans call for five wildcats-three operated by BP and two by ARCO.
BP kicked off the program with 1 Cascade in section 3-12n-11e, southeast of Milne Point field, spudding in late January with Nabors Drilling Co.'s Rig 28E and releasing the rig at the beginning of April. The initial program called for directionally drilling the hole to bottom about 800 ft southwest of the surface location. The program for a redrill called for bottoming about 700 ft west and slightly north of the surface location. Results were not released.
The other two wells to be operated by BP are 1 Sag Southwest in section 2-11n-16e and 1 Yukon Gold in section 23-8n-23e. Sag Southwest is to be drilled in June from the main production island in Endicott field. Drilling at Yukon Gold is scheduled to begin in late October or early November.
A new ice pad Construction technique developed by BP is being tested at the Yukon Gold drillsite, about 50 miles east of Prudhoe Bay and 3 miles west of the Staines River. The river forms the western boundary of ANWR. The technique could enhance the economics of exploratory drilling on the North Slope, said Eric M. Luttrell, BP vice-president for Alaskan exploration.
To minimize damage to arctic tundra, exploratory drilling on the North Slope takes place during the winter when the ground is frozen, In an effort to extend the drilling season, BP built the Yukon Gold pad in about a 3 week period in late March and early April using prefabricated, reusable panels to insulate the site through the summer. By building the pad in the winter and insulating it, BP expects to begin drilling this fall when ice pad construction normally would only be beginning.
"Extending the drilling season enables us to evaluate the prospect more completely in a single season and provides an opportunity to drill more than one well in a season," Luttrell said. "There is a substantial cost saving there. Time is important."
If successful, it's anticipated the technology can be applied to other exploration prospects on the North Slope.
The 6 in. thick ice pad currently is overlain by plastic sheeting, prefabricated insulation panels, a surface cover to reflect sunlight, and an anchoring system. Once temperatures are low enough to keep the pad frozen and prior to drilling, the reusable insulation system will be removed. The pad will hold the rig, camp, and other facilities to support drilling.
Insulated panels developed by BP's drilling department are designed for easy installation and removal to minimize environmental impacts, avoiding debris, leftover gravel and other semipermanent foundation materials and surface scarring left by several previous efforts to insulate ice pads. Yukon Gold panels were manufactured in Auburn and Kent, Wash., by APC International, a subsidiary of Arctic Slope Regional Corp., and Uresco Construction Materials Inc.
BP owns a two-thirds interest in the prospect, Unocal one-third. The project is expected to cost about 515 million, including about $1.3 million for ice pad construction. Drilling and evaluation is expected to require 2-3 months.
Depending on results, a sidetrack to a second subsurface location may be drilled from the same pad next winter or a second well could be drilled from another pad.
Drilling contractor for Yukon Gold is Pool Arctic Alaska.
BP participated in two wildcats drilled this winter by ARCO, as operator, in the Colville River Delta area west of Kuparuk River field: ARCO-BP 1 Till and ARCO-BP 1 Colville River.
And Exxon Corp. joined the North Slope winter campaign with a wildcat on Thetis Island, 6 miles northwest of Kuparuk River field, drilling the tight hole in section 19-14n-8e.
BADAMI APPRAISAL
One of BP's first moves to evaluate a joint venture with Conoco Inc. and Petrofina Delaware Inc. in the Badami discovery area between Endicott field and the Point Thomson Unit ended the first week of May with completion of a 3D seismic survey of the area begun Mar. 1 by GECO-Prakla Inc. Data from the survey is being processed.
Under terms of the joint venture, BP will operate the appraisal phase of the joint venture area, which includes 17 leases covering more than 70,000 acres about 20 miles east of Endicott field. BP's equity depends on the extent of appraisal and exploration work performed.
"We hope to be able to start drilling as early as next winter," Luttrell said. "Because of an ice road, mid-January would be the earliest we could start."
The 1 Badami discovery, drilled in section 9-9n-20e by Conoco and Petrofina in 1990, flowed 4,250 b/d (OGJ, Aug. 5, 1991, p. 32). A second well was drilled in 1992, but results have not been revealed, and no reserve estimates have been released.
As for next year, Luttrell said, "I look for exploratory activity to be similar in scope to 1993."
PRUDHOE UPDATE
Prudhoe Bay field remains the cornerstone of BP's Alaskan presence, providing the company its largest single asset worldwide and about half of its worldwide oil production.
Julian R. Darley, president of BP Exploration (Alaska), told the Anchorage Chamber of Commerce his company since 1990 has been able to transform its prospects in the face of declining production and rising costs from perilous to promising.
"Our challenge has been to minimize the production decline and most important-reverse the trend of rising costs. Major changes have been required to deliver the necessary improvements."
Darley listed four categories of changes:
- Eliminating duplication and enhancing efficiency by working more closely with ARCO in operation of Prudhoe Bay field.
- Finding ways to work "smarter" within BP.
- Forming strategic business alliances with key contractors and suppliers to improve their performance.
- Investing to maximize recovery from existing fields while exploring new opportunities on the North Slope.
"The fruits of these initiatives, inside and outside of BP, have been nothing short of remarkable," Darley said. "Our operating costs rose 34% during 1989-90, but last year they declined for the first time since production began in 1977. We've set ourselves the audacious target of keeping the real operating cost per barrel at Prudhoe flat through 1995. We don't know how we will achieve this target, but we're confident we'll find a way.
"As the largest private investor in Alaska since the early 1970s, BP has already invested about $15 billion in developing North Slope oil reserves, and we plan to go on investing more than $500 million/year. These plans will become reality if they continue to make good business sense-if they are competitive and successful endeavors.
PRODHOE POTENTIAL
Brian E. Davies, BP senior vice president of the Prudhoe Bay Unit, said slowing the production decline and bringing the cost down the past 2 years has been "basically having everybody accept the fact that unless we all strive to do things better the field's decline becomes sooner rather than later.
"We've had several initiatives to develop better teamwork and other initiatives that look at the total business process to be sure the interface with teams, contractors, and suppliers is also efficient. Part of it is to recognize the tremendous mind resource that's out there."
Davies expects Prudhoe Bay production to amount to 1.1-1.2 million b/d this year.
"I think significant development opportunities still exist," he said, citing expansion of EOR projects such as the miscible gas injection project and potential expansion of waterflooding"But the significant part is going to be continued drilling opportunity, and that depends on bringing down ,the cost of wells."
The goal is to reduce costs during the next 2-3 years from the present $2.5-3 million/well to $2 million or less.
Most of the current drilling is "fine tuning," Davies said, attempting to answer questions of where the oil is coming from and where it is being left behind. He predicted horizontal and extended reach wells will play a larger role in the future.
"Large fields like Prudhoe Bay offer significant potential for adding reserves," Davies said. "When the field went on production, reserves were estimated at about 10 billion bbl. Now everybody is pretty confident we're going to produce 12 billion bbl or more. So basically, 2 billion bbl of reserves have been realized through additional development, and I don't think that process has ended.
"The same exists in other fields - Kuparuk River and Endicott. The numbers aren't going to be as large because they don't have such a large resource base. Exploration is important, but so is optimizing recovery from these very large fields."
KUPARUK MILESTONE
A milestone in North Slope production is to occur this month with production of Kuparuk River field's 1 billionth bbl of oil.
The field will become only the 14th in the more than 130 year history of commercial oil production in.the U.S. to achieve that mark. Only two more fields-California's South Belridge and Ventura fields-are believed to have the potential to eventually produce 1 billion bbl.
Kuparuk River, a 1969 discovery by BP and Sinclair Oil Corp., now part of ARCO, had to wait almost 13 years before making its contribution. Overshadowed by Prudhoe Bay, the field was not placed on stream until 1981. Production was expected to peak in 5 years at 250,000 b/d. Last year, the field produced a record 322,000 b/d average.
Reserve estimates have been raised from the initial 1.2-1.5 billion bbl to 1.8 billion bbl.
Drilling and workovers are expected to help sustain production in the short term. Recovery enhancement includes waterflooding throughout the field, water-alternating-gas (WAG) flood, and a small miscible WAG flood. Additional drilling and expanded miscible flooding are being evaluated to further improve field performance and maintain rates at about 300,000 b/d through the end of the century.
Kuparuk River Unit covers more than 200 sq miles and includes three major production facilities, 40 drill-sites, 369 producing wells, 317 injection wells and a 24 in. pipeline that connects the field with TAPS Pump Station 1. The field's owners are operator ARCO 55.17%, BP 39.19%, Unocal 4.95%, Mobil 0.36%, Exxon 0.22%, and Chevron 0.11%.
Meanwhile, another field is moving toward a share of North Slope production.
Point McIntyre field, just 2 miles north of the Prudhoe Bay producing area, is scheduled to begin production in September. The 1989 discovery is expected to go on stream at about 40,000 b/d through Lisburne field facilities. Peak production from both fields is projected at 100,000 b/d. Point McIntyre reserves are estimated at 300 million bbl.
ARCO will serve as Point McIntyre operator. Exxon and BP also hold strong lease positions.
Between Endicott and Point McIntyre lies the 58 million bbl Niakuk field, which BP would like to produce through Lisburne facilities via directional wells drilled from Heald Point north of the Sagavanirktok River delta.
North of Kuparuk River, Conoco in 1991 began drilling the first of 16 wells to tap the Scrader Bluff pool in Milne Point Unit. The shallow reservoir features 17 gravity oil and is thought to hold 250 million bbl of oil. Alaska Oil & Gas Conservation Commission late last year approved Conoco's request for a waterflood that is expected to boost recovery to about 21% from primary recovery of about 12%.
Such efforts underscore industry's intent to ensure Alaska remains a key producing province well into the 21st century.
Copyright 1993 Oil & Gas Journal. All Rights Reserved.
